Home Sales Rise 4.3% In January

In three of the last four months, sales of existing homes have risen over the month before. In this market, that's almost a cause for celebration.

In January, home sales increased 4.3 percent to a seasonally adjusted annual rate of 4.57 million in January from a downwardly revised 4.38 million-unit pace in December, according to the National Association of Realtors (NAR). Not only are sales up from the previous month, they are nearly one percent higher than in January 2010.

Buyers are responsive

Lawrence Yun, NAR chief economist, said strong gains in contract activity in recent months show buyers are responding to very favorable market conditions.

“The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” Yun said.

In another positive sign for the housing market, total housing inventory at the end of January fell 0.4 percent to 2.31 million existing homes available for sale. NAR says that represents a 6.1-month supply at the current sales pace, down from a 6.4-month supply in December.

Foreclosures selling quickly

Even the large numbers of foreclosures are not weighing down the market as they once did. Yun says foreclosure sales are moving swiftly, with buyers and investors competing in nearly every market. In fact, Yun says the market is recovering to the point that a government proposal to turn bank-owned properties into rentals on a large scale “does not appear to be needed at this time.”

The ability to secure a mortgage does, in fact, appear to be a remaining market drag. Even so, there were plenty of buyers last month who didn't need a bank.

All-cash sales were unchanged at 31 percent in January; they were 32 percent in January 2011. Investors account for the bulk of cash transactions, according to NAR.

Investors purchased 23 percent of homes in January, up from 21 percent in December; they were 23 percent in January 2011. First-time buyers rose to 33 percent of transactions in January from 31 percent in December; they were 29 percent in January 2011.