by Marcie Geffner
Inman News Features
Home sales activity posted records again last month, according to the latest housing market report from the National Association of Realtors®.
Sales of existing single-family homes in January surged to a seasonally adjusted annualized rate of 6.04 million units, an increase of 16.2 percent compared with the 5.2 million-unit pace set in December and an increase of 14.6 percent compared with the 5.27 million unit pace set in January 2001. The previous largest monthly increase was 13 percent in May 1995.
The 6.04 million January figure is an unprecedented monthly high total and represents the first time annualized home sales have reached the 6-million mark, according to the association. The previous monthly record was an annualized rate of 5.49 million home sales set in August.
The pace is considerably stronger than had been anticipated in NAR’s forecast earlier. Home sales were expected to total 5.2 million this year, a small 1.1 percent softening compared with last year’s record total of 5.25 million home sales. Home sales in 2000 totaled 5.11 million, and the previous record, set in 1999, was 5.21 million homes sold.
The annualized rate of home sales 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. NAR has been tracking home sales since 1968.
Low interest rates continued to be a contributing factor to the boom in home sales.
The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 7 percent in January, according to Freddie Mac, a level that was largely unchanged from the from 7.07 percent average in December and 7.03 percen average in January 2001.
But interest rates aren’t the only factor at work.
NAR Chief Economist David Lereah said increased consumer confidence and unseasonably warm weather also contributed to the sales volume record.
“What’s new is the effect of a gradual increase in consumer confidence combined with a turnaround in the economy. Some people who’ve held back from major commitments over the last few months have entered the housing market,” he said.
The Conference Board’s consumer confidence index rose for the second consecutive month in January. The index stood at 97.3 (1985=100), up nearly three points from 94.6 in December. The present situation index remained unchanged at 97.8, but the expectations index, a future-outlook barometer, rose from 92.4 to 96.9.
“In January, consumer confidence on expectations for the future was the highest (it had been) in 13 months. Since purchasing a home is a long-term investment, this bodes well for the continuing strength of the housing market this year,” Leareh said.
Warm weather is bringing home buyers out of their usual winter hibernation, the economist added.
“Unseasonably mild weather in much of the country has encouraged potential buyers to move from shopping on their computers to visiting real estate offices and homes for sale,” he said.
Another factor is long-term demographic trends.
NAR President Martin Edwards Jr. said the United States is attracting a large number of immigrants at the same time that baby boomer’s children are entering their prime years for buying a home. And both groups have their minds set on home ownership, he said.