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Friday, February 19, 2021

Comments on January Existing Home Sales

by Calculated Risk on 2/19/2021 10:42:00 AM

Earlier: NAR: Existing-Home Sales Increased to 6.69 million in January

A few key points:

1) This was the highest sales rate for January since 2005, and the 2nd highest sales for January on record. Some of the increase over the last seven months was probably related to pent up demand from the shutdowns in March and April.  Other reasons include record low mortgage rates, a move away from multi-family rentals, strong second home buying (to escape the high-density cities), a strong stock market and favorable demographics.

The delay in the buying season has pushed the seasonally adjusted number to very high levels.  
For example, assuming the buying season was shifted three months by the pandemic, this number of sales, Not Seasonally Adjusted (NSA) in October, would have given a 4.3 million Seasonally Adjusted Annual Rate (SAAR), as opposed to the reported 6.69 million SAAR for January.   So the delay in the buying season is a factor in the headline number being so high.

This also means there are going to be some difficult comparisons in the second half of 2021!

2) Inventory is very low, and was down 25.7% year-over-year (YoY) in January.  Also, as housing economist Tom Lawler has noted, the local MLS data shows even a larger decline in active inventory (the NAR appears to include some pending sales in inventory). Lawler noted:
"As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months."
Months-of-supply is at a record low.  Inventory will be important to watch in 2021, see: Some thoughts on Housing Inventory

Existing Home Sales YoY Click on graph for larger image.

This graph shows existing home sales by month for 2020 and 2021.

The year-over-year comparisons will be easy in the first half of 2021 - especially in April, May and June - and then difficult in the second half of the year.   

Sales NSA in January (367,000) were 15.8% above sales last year in January (317,000). This was the highest sales for January (NSA) since 2006.