Home Sales Rise In January

Amid a number of signs that housing is sinking deeper into a recession comes a surprising report from the National Association of Realtors (NAR): Existing home sales mounted a surprising increase last month, led by investors who didn't require financing.

Sales of existing single-family, townhomes, condominiums and co-ops, increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December and are 5.3 percent above the 5.09 million level in January 2010. (Read consumer complaints about realtors).

That last point is significant, says NAR, because it's the first time in seven months that sales activity was higher than a year earlier.

"The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence," said NAR Chief Economist Lawrence Yun. "The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity."

Indeed, investors accounted for 23 percent of the January purchases. Investors bought 17 percent of the homes in December and 20 percent in January 2010.

Cash

Many of these investors by-passed mortgage companies and wrote a check. All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010.

"Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand," Yun said. "With tight credit standards, it's not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes."

All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was 20 percent in 2009, rising to 28 percent last year.

More bargains

The national median existing-home price for all housing types was $158,800 in January -- down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010.

Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale. That represents a 7.6-month supply at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply.

Regional breakdown

Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010. The median price in the Northeast was $236,500, which is four percent below a year ago.

Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300 -- 3.2 percent below January 2010.

In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are eight percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago.

Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are seven percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.