Existing Home Sales Slide, Inflation Remains Global Threat, Single-Family Rental Construction Rises
Existing Home Sales Decline
Sales of existing U.S. single-family homes declined for the 12th consecutive month in January as mortgage rates and affordability challenges weighed on prospective house buyers including apartment dwellers.
Sales slid 0.7% from the prior month and 36.9% from a year earlier to a seasonally adjusted 4 million units in January, as the median sales price rose 1.3% from a year earlier to $359,000, the National Association of Realtors reported Tuesday. Declines of month-over-month unit sales were concentrated in the East and Midwest while the South and West registered increases, though all four regions posted year-over-year drops.
“Home sales are bottoming out,” Lawrence Yun, the trade group’s chief economist, said in a statement. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”
Rising unsold inventory, currently at a 2.9-month supply compared with 1.6 months a year earlier, could work to buyers’ advantage. “Inventory remains low, but buyers are beginning to have better negotiating power,” Yun said. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”
Commenting on the NAR numbers, economists at Oxford Economics said Tuesday the research firm expects U.S. home sales “to move sideways through much of 2023 before staging a modest recovery late in the year.”
Inflation Remains Global Threat
Resilient employment and wage growth are improving consumer sentiment and easing recession concerns in the U.S. and other advanced economies globally. But inflation could become an even more persistent threat in the first half of 2023 than previously expected, keeping central banks on high alert, according to a report this week from analysts at Oxford Economics and Penta Research.
Researchers said a strong U.S. labor market, which created more than 500,000 jobs in January, has been joined by other positive global indicators in the early months of 2023, including tumbling European gas prices and the reopening of some China trade channels that had been shut down by the pandemic.
“Subsiding concerns aren’t a signal that the economic cycle is re-accelerating, however,” Oxford Economics said in a research note. “Our indicators continue to point to stagnating consumer spending across the U.S. and Europe.”
Researchers also cited “pockets of weakness,” such as Canada, “where consumer sentiment is deteriorating more markedly, reflecting the worse outlook for housing markets and credit conditions there.”
U.S. annual inflation was 6.4% in January, down from 6.5% in the prior month but still close to a 40-year high, according to government figures. The U.S. unemployment rate remained at a 50-year low of 3.4% in January.
Single-Family Rental Construction Rises
Single-family houses being built specifically to be rented out significantly grew their share of total housing starts during 2022, signaling accelerated demand among renters otherwise unable to afford to buy homes in many U.S. regions.
Citing Commerce Department data, the National Association of Home Builders noted there were 17,000 construction starts in the U.S. for single-family, built-for-rent units in the fourth quarter, up 6% from a year earlier. The full-year 2022 total was 69,000, marking a 33% increase from 2021.
Robert Dietz, the trade group’s chief economist, said this category is growing its market share of total housing starts, averaging 7% over the past four quarters compared with the historical average of 2.7%. Single-family rental housing is increasingly seen as a response to challenges over housing supply, affordability and down payment requirements in the for-sale market, especially as renters seek more space in configurations closer to single-family setups.
“With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession,” Dietz said in a statement.
“As more households seek lower density neighborhoods and single-family residences, a growing number will do so from the perspective of renting,” Dietz said. “This will be particularly true as mortgage interest rates remain elevated.”
Elgin Development Group
Lou Hirsch, CoStar
- February 22, 2023