Existing-Home Sales Hold Steady in January, Says National Association of Realtors(r)

Existing-Home Sales Hold Steady in January, Says National Association of Realtors(r)

Existing-home sales, revised with improved methodology, were essentially flat in January but remained at historically high levels, according to the National Association of Realtors(r).

Total existing-home sales, including single-family, townhomes, condominiums and co-ops, slipped 0.1 percent in January to a seasonally adjusted annual rate (see note) of 6.80 million units from a level of 6.81 million in December. Last month’s sales activity was 13.7 percent above the 5.98 million-unit pace in January 2004.

David Lereah, NAR’s chief economist, said January home sales were buoyed by the condo sector. “A slight decline in single- family home sales was offset by a record monthly level of condo sales, which just came off its ninth consecutive record year,” he said.

Lereah noted this is the first monthly report in the revised existing-home sales series. “NAR took the initiative to update and improve the modeling for the existing-home sales series to more accurately reflect the growth and changes in the housing market,” he said.

Monthly revisions have been made back through the benchmark year of 1999, with additional revisions made back to 1989 using improved methodology. In addition to better modeling, some of the changes result from previously overestimating the number of for- sale-by-owner transactions (FSBOs), which have shown a sustained decline.

“These changes help to make the existing-home sales series a better measure of actual marketplace activity,” he said. “When the existing-home sales series was created in 1968, condos weren’t even on the horizon in terms of an important market share. In fact, we didn’t start tracking condos until 1981 after baby boomers started to fuel demand for them in the late 1970s.”

When it was decided to improve the methodology for reporting home sales, following revisions by the U.S. Census Bureau and with input from the Federal Reserve Board, it was only natural to add condo sales.

As a result of the changes, the series for existing single- family sales was revised downward by 10.6 percent for the benchmark year of 1999 — these changes affect the entire series from 1989 though 2004. For example, single-family sales originally were reported at 6,675,000 for 2004; the improved methodology now shows a total of 5,964,000, still a record. Although data has been downwardly revised, the overall characterization of the resale market in terms of historic comparisons and relative changes are consistent with previously reported data. Major government indicators undergo similar periodic changes.

The national median existing-home price for all housing types was $189,000 in January, up 10.5 percent from January 2004 when the median price was $171,000. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Al Mansell, CEO of Coldwell Banker Residential Brokerage in Salt Lake City, said strong price growth is being driven by a shortage of homes available for sale. “The demand for homes remains in record territory, but the supply of homes on the market set an all-time low in January,” he said. “The growth in home equity is adding to housing wealth and helping the overall economy, yet low mortgage interest rates are keeping homes within reach of buyers in most of the country.”

Total housing inventory levels declined 5.8 percent at the end of January with 2.09 million existing homes available for sale, which represents a 3.7-month supply at the current sales pace — a record low.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.71 percent in January, down from 5.75 percent in December; it was 5.71 percent in January 2004. “Aside from a handful of months over the last two years, you have to go back to the mid-1960s to see mortgage interest rates where they are today,” Mansell said. January was the sixth-lowest month on record since Freddie Mac started tracking interest rates in 1971.

Condominium and cooperative housing sales accounted for 12.6 percent of transactions in January. Existing condo sales rose 2.3 percent to a record seasonally adjusted annual rate* of 858,000 units in January from a level of 839,000 in December. Last month’s sales activity was 22.4 percent above the 701,000-unit pace in January 2004. The median condo price was $203,700, up 15.1 percent from the same month a year ago.

Single-family home resales declined 0.5 percent in January to a seasonally adjusted annual rate (see note) of 5.94 million units from a level of 5.97 million in December. Last month’s sales activity was 12.5 percent above the 5.28 million-unit pace in January 2004. The median single-family home price was $186,900 in January, up 9.8 percent from January 2004.

The home resale pace in the West rose 0.6 percent to an annual rate of 1.59 million units in January and was 16.9 percent stronger than January 2004. The median existing-home price in the West was $277,000, up 16.4 percent from the same month a year earlier.

In the Northeast, existing-home sales declined 3.5 percent from December to a pace of 1.09 million units in January, but were 11.2 percent above the level in January 2004. The median existing-home price in the Northeast was $231,000, up 9.5 percent from a year ago.

Homes in the Midwest were reselling at an annual rate of 1.47 million units in January, down 5.2 percent from December, but were 10.5 percent above January 2004. The median price in the Midwest was $151,000, up 8.6 percent from a year earlier.

The National Association of Realtors(r), “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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NOTE: The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Because of the benchmark revisions, data prior to 1999 is not directly comparable, but has been revised going back to 1989 using improved methodology. The separate quarterly track of existing condo/co-op sales has been discontinued. The monthly revisions for total existing-home sales and existing condominium and cooperative sales go back to 1999. Condo sales also experienced a downward revision — 20.7 percent — for the benchmark year of 1999. Condo data prior to 1999 is available only on a quarterly basis, while monthly single-family data has been revised back to 1989. Some revisions are posted in the Research area of Realtor.org.

Existing-home sales, which are based on transaction closings, differ from the U.S. Census Bureau’s series on new-home sales, which are based on contracts or the acceptance of a deposit. In the count of new-home sales, a house can be in any stage of construction ranging from not started to fully complete. The count of existing-home sales is based on completed transactions in which the home usually is ready for occupancy. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing- home sales, which generally account for 85 percent of total home sales, are based on a much larger sample — nearly 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions that are fairly common in the new-home sales series.

Information about NAR is available at http://www.realtor.org. This and other news releases are posted in the Web site’s “News Media” section in the NAR Media Center. Statistical data, charts and surveys also may be found in the NAR Media Center by clicking on Economic & Housing Statistics.

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