Wow! Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Sales are now 11.0 percent higher than a year ago – the largest year-over-year gain since July 2013 (16.3 percent).
This is creating a bottle neck for home buyers, as the unsold inventory of homes is down to 4 months, with such a hot sales market. Yet first-time home buyers are hanging in there with 32 percent of sales, up from 28 percent last year, and below the 40 percent during more normal times.
The median existing-home price for all housing types in January was $213,800, up 8.2 percent from January 2015 ($197,600). Last month's price increase was the largest since April 2015 (8.5 percent) and marks the 47th consecutive month of year-over-year gains.
Lawrence Yun, NAR chief economist, says existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million). "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," he said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."
The S&P/Case-Shiller U.S. National Home Price Index, a more accurate measure of overall existing-home prices because it uses a 3-month average of same existing-home prices, recorded a slightly higher year-over-year gain with a 5.4 percent annual increase in December 2015 versus a 5.2 percent increase in November 2015.
Portland, Denver and San Francisco prices continue to rise the fastest, with more than 10 percent annual increases. But Tampa and Seattle are close behind. These prices reflect the growing prosperity of high growth regions, and are reflected in a recent survey of cities and regions with the most job creation.
This incredible graph captures where job growth is actually happening—on the coasts for the most part. Marketwatch says cost-estimating website HowMuch.net used data from the Bureau of Labor Statistics to create this three-dimensional representation of the number of jobs added by metro area. It should be no surprise that California with its Silicon Valley led all states with more than 464,000 jobs related.
The Greater New York metropolitan area, which includes Newark and Jersey City, showed the highest increase for any single metro area in the country with 156,400 new jobs. And, the Los Angeles metro area, including Long Beach and Anaheim, was second at 135,100 jobs.
This means more housing is needed and the construction industry is finally beginning to respond, with housing starts now above a 1 million unit rate, and permits for new housing even higher. Why are first-timers able to buy? The medium household income has also risen, up 6.5 percent since 2013, and interest rates are back to historical lows, making home buying more affordable.
But continuing housing recovery is dependent on more and higher paying jobs. We know the millennial generation, from 18 to 36 years, will be key to this happening. They now make up 53 percent of the working age work force.
However, their pay is still at the low end, according to data from the Minnesota Population Center's 2014 "American Community Survey" in the Integrated Public Use Microdata Series. The medians ranged between a low of $18,000 per year in Montana and a high of $43,000 in the District of Columbia. It’s because so many are still teenagers or in school. But that should change in coming years.
Harlan Green © 2016
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