Kiplinger Housing Outlook: Existing-Home Sales Fall Despite Lower Mortgage Rates
The low inventory of existing homes is putting upward pressure on house prices.
Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
Home prices continue to rise at a steady pace. The S&P Cotality Case-Shiller U.S. National Home Price Index, which measures the price of existing homes across the nation, rose 1.3% in December from a year earlier, the same rate as in the previous month. On a month-over-month, seasonally adjusted basis, home prices rose 0.4%. While high prices and elevated mortgage rates continue to weigh on demand, a relatively low supply of homes for sale is supporting continued price growth. Chicago reported the strongest gains over the year, followed by New York and Cleveland. At the other end of the market, Tampa, Florida, saw the steepest decline in home prices, followed by Denver and Phoenix.
Housing starts started the year on strong footing. Last year was tough for home builders as buyers remained on the sidelines for much of the year, due to affordability challenges. Residential construction jumped 7.2% in January, following gains in the previous two months. A surge in multifamily starts was mostly responsible for the January increase, with multifamily construction increasing 29.9%. This construction tends to bounce around on a monthly basis and the data are often subject to large revisions, so January’s increase should be taken with a grain of salt. Single-family starts didn’t show a similar increase, and in fact fell 2.8%. Builders appear to be scaling back production, as the supply of new homes remains elevated relative to sales, leading to about one-third of builders slashing prices to reduce their inventory.
Article continues belowFrom just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
New-home sales will continue rising later this year, reflecting lower mortgage rates and incentives from home builders. New-home sales fell sharply to start the year, dropping 17.6% from the previous month to 587,000 annualized units. Sales fell in all census regions in January, but the Northeast posted the largest decline. That steep drop occurred during a period when cold weather and post-holiday spending fatigue can often dampen demand.
Existing-home sales fell at the start of the year despite the drop in mortgage rates. Sales of previously owned homes fell 8.4%, to 3.91 million annualized units, in January. The monthly drop in part owed to poor weather across much of the country. Beyond the monthly volatility, the trend in home sales looks to be gradually improving. Mortgage purchase applications continue to slowly trend higher. That said, low inventory is still keeping home price appreciation in positive territory. Inventory of existing homes has risen 3.4% over the past year, but it is still far below prepandemic levels. In January, there were enough homes on the market to last 3.7 months at the present sales pace, up from 3.5 months in December.
Related content
