​New home sales rose in January to 555K units on a seasonally adjusted annualized basis, an improvement on December’s 535K units, but less than the consensus forecast of 576K units. Sales were up 3.7% from the prior month and 5.5% from a year ago.

By region, sales rose the most in the Northeast, which saw a 15.8% increase from the prior month. Sales rose 14.8% in the Midwest and 4.3% in the South, but declined 4.4% in the West. Compared to a year ago, sales were up a strong 22.2% in the Northeast, 16.2% in the West and 4.5% in the Midwest, but were down 1.0% in the South.

In the fourth quarter, median prices were up 1.6% y/y in the Midwest, but were down 2.0% in the South, 2.5% in the West and 16.7% in the Northeast. The Census Bureau does not report regional median prices by month, only quarterly and annually. Despite the 7.5% y/y increase in the national median price in January, the 12-month moving average trend of price growth has been slowing over the last couple of years, suggesting we may be near a peak in prices for new homes.

​As with the existing home market, inventory continues to be a big story right now. In January, there was only 5.7 months’ worth of supply available. While this is a bit higher than the 5.3 month average over the past year, it is still far below the supply levels of the previous boom, and not enough to meet torrid demand. Fortunately, the number of new homes for sale has jumped in the last couple months, which should bring some relief to frustrated buyers. Builders are likely reluctant to ramp up construction too much partly due to the risk of overbuilding and causing another crash, and partly because current demand is being driven by ultra-low mortgage rates, which are not only unsustainable, but are now on the rise. Rising mortgage rates may be starting to temper demand as mortgage applications have dropped in 3 of the last 4 weeks, so we may be near a turning point in the housing market. 

​Interestingly, the path of home price growth during this housing cycle is nearly a mirror image of the path of home price growth during the last cycle when viewed on a year-over-year percent change, 12-month moving average basis. If supply or mortgage rates move up, prices will likely fall. If they both move up, prices could fall significantly. With inflation on the rise and the Fed primed to raise interest rates, this low-mortgage-rate-induced housing boom may be coming to an end. Stay tuned! 

Existing home sales rose in January to 5.69 million units on a seasonally adjusted annualized basis, an improvement on December’s 5.51 million units, far better than the 5.58 million forecast and the highest since February 2007. Sales were up 3.3% from the prior month and 3.8% from a year ago, more than doubling December’s 1.5% year-ago pace.

By region, sales rose the most in the West, which saw a 6.6% increase from the prior month. Sales rose 5.3% in the Northeast and 3.6% in the South, but declined 1.5% in the Midwest. Compared to a year ago, sales were up a strong 8.4% in the West, 6.7% in the Northeast and 3.1% in the South, but were down 0.8% in the Midwest. Median prices were up the most in the South at 9.2% y/y, while they were up 6.8% in the West, 6.5% in the Midwest and just 2.5% in the Northeast. 

​By type, sales jumped 8.3% over December for condos and co-ops but rose just 2.6% for single family homes. On a year-ago basis, sales were up 4.8% for condos and co-ops and 3.7% for single family homes. Prices were up 7.3% from a year earlier for single family homes and up 6.2% for condos and co-ops. Inventory was down 10.0% y/y for single family homes and 13.2% y/y for condos and co-ops.  

Inventory continues to be the big story right now. In January, there was only 3.6 months’ worth of supply available, the lowest in several years, while the 12-month moving average was just 4.3 months. With mortgage rates still fairly low on a historical basis, demand for existing homes is high, but with inventory so low, it is definitely a seller’s market, and a very tight one at that. One big reason that inventories are so low is that some people who bought homes at the peak of the bubble in 2006 still have not recuperated all of their losses, so they are reluctant to sell, choosing instead to wait for prices to go even higher. In addition, an improving economy has helped to open up job opportunities for many people, some of whom had to move. Thus, it could be that many people simply don’t want to or need to sell their home right now, even though prices have reached pre-crash peaks in some places. Recent college graduates, new job finders and those who have finally saved enough to buy a home are all competing for starter and mid-market homes, but are finding very slim pickings. Rising mortgage rates may be starting to temper demand as mortgage applications have dropped in 3 of the last 4 weeks, so if you are thinking about selling, do it.