Existing home sales rise more than forecast as supply drops

Sales of previously owned U.S. homes climbed for the fifth time in six months to the highest level since 2007, indicating housing-market momentum will extend into 2017, National Association of Realtors data showed Wednesday.

Key points:

– Contract closings rose 3.3 percent to a 5.69 million annual rate in January (forecast was 5.55 million), the highest level since February 2007.

– Median sales price jumped 7.1 percent from a year earlier to $228,900, the fastest gain since January 2016.

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– Inventory of available properties fell 7.1 percent from January 2016 to 1.69 million, making it the 20th consecutive year-over-year decline.

Big picture:

Housing demand remained strong in January despite dwindling inventories of available homes. While a solid job market and rising wages continue to support gains in the industry, supplies could remain limited by a shrinking number of distressed properties as well as strength in the rental market. A post-election jump in mortgage rates, led by optimism about President Donald Trump’s plans to ease regulations and spur economic growth, could also impact housing demand in 2017.

Economist takeaways:

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“Rates have risen, but despite that, there is tremendous resilience from consumers wanting to buy a home,” Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the data were released. “The problem remains that there is very little inventory.”

The details:

– NAR projects sales in 2017 will increase 1.7 percent from last year.

– January sales rose in three of four regions, including a 6.6 percent increase in the West and a 3.6 percent gain in the South.

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– At the current pace, it would take 3.6 months to sell the houses on the market, unchanged from December; Realtors group considers less than a five months’ supply as consistent with a tight market.

– Single-family home sales increased 2.6 percent to an annual rate of 5.04 million.

– Purchases of condominium and co-op units rose 8.3 percent to a 650,000 pace.

– First-time buyers accounted for 33 percent of all sales, compared with 32 percent in the prior month.

– Homes sold in 50 days in January, compared with 52 days in December and 64 days a year earlier.

– Of homes sold in January, 38 percent were on market for less than a month.