Boston.com Staff | 02.23.15 | 5:14 PM
Sales of existing homes – or previously owned homes – dropped to their lowest levels in nine months in January, according to a new report from the National Association of Realtors.
The NAR report found existing home sales fell 4.9 percent to a seasonally adjusted annual rate of 4.82 million in January, from "an upwardly revised" 5.07 million in December. Existing home sales are completed transactions on single-family homes, townhomes, condominiums, and co-ops.
These are the lowest sales figures reported since last April when 4.75 million sales were reported.
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But in spite of the drop experienced in January, home sales are 3.2 percent higher than a year ago, according the NAR report.
The report could mean bad news for many potential first-time buyers. Despite the availability of low interest rates, low housing inventory is keeping home prices too high for many potential first-time homeowners.
"[NAR is] reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions," said NAR chief economist Lawrence Yun in a press release. "January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows."
NAR found that by the end of January, existing home inventory was at 1.87 million, down from 1.88 million homes a year ago. Fewer homes available for sale means home prices go up, which could mean fewer buyers.
The Northeast and the West saw the biggest drop in home sales. In the Northeast, sales fell by 6 percent, while the West saw a 7.1 percent decline. The median home price for the Northeast was $ 247,800, which is 2.7 percent higher than a year ago. The median price in the West is $ 291,800.
In terms of a long-term economic indicator, Lexington think tank IHS describes the reports' findings as "mixed." In a statement, the group said:
"On the one hand, sales volumes fell to a nine-month low; on the other hand, price growth remains healthy. Looking at three-month moving averages of single-family sales, it appears that the only region currently displaying positive momentum is the South. But the news was not all sour: single-family sales expanded year-on-year for the fourth consecutive month."
Patrick Newport, an economist for IHS, agrees that aspiring homebuyers may have to put their goals on hold based on the NAR report's findings.
"For the first-time homebuyers, this is not good news," Newport told Boston.com. "Prices are going up and will continue to go up at a rate higher than inflation because inventory numbers are among the lowest we've seen for the month of January."
Newport also expects the Federal Reserve to raise interest rates over the next few months, which could further complicate the goals of many first-time buyers.
But there is some silver lining to the NAR report. The median price for all types of existing homes was $ 199,600 in January, which is 6.2 percent higher than the same time last year. IHS puts more stock in this finding than existing home sales.
"[The median price] figure gives a better indication of the housing market's overall health than do sales volumes, in part because it can serve [as] an indicator of future activity. Robust price growth inspires more homeowners to list their houses for sale," according to IHS's analysis.
In other words, the rise in median home prices could prompt many homeowners to list their homes, which could mean greater home inventory in the future.
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