Sales of existing U.S. homes rose a seasonally adjusted 2.7% from December to January, to a better-than-expected 5.36 million, according to the National Association of Realtors.
That figure is an eight-month high and the fifth rise in six months, as buyers were enticed by falling home prices.
Year-over-year, sales rose 5.3%, so that activity is now above the level when the home buyer tax credit expired in 2010, putting pressure on home sales.
Without season adjustment, sales would have fallen 30% from December, but that is not unusual for the slow winter season.
While a somewhat improved employment outlook and recent rosier economic outlook contributed to the gain, buyers are also likely taking advantage of depressed home prices, which some see as susceptible to further pricing pressure.
Surging sales of distressed properties pushed prices for previously owned U.S. homes to a
near nine-year low in January, even as they helped to lift overall sales to an eight-month high.
The National Association of Realtors said on Wednesday existing homes sales climbed 2.7 percent to an annual rate of
5.36 million units, marking the third straight month of gains. Economists had expected a fall to a 5.24 million-unit pace.
But foreclosures and short sales, which typically occur below market value, accounted for 37 percent of the
transactions and suggested further price declines ahead. The median home price fell 3.7 percent from a year ago to $158,800, the lowest since April 2002.
“What this shows is that there will be an ongoing adjustment to prices to the downside. Housing fundamentals are still weak,” said Neil Dutta, an economist at Bank of America Merrill Lynch in New York.
Home prices are down but sales are up, somewhat contradictory trends.
Home prices fell nearly 6% during the six months ended Dec. 31, sending values to their lowest levels in the post-bubble period, S&P/Case-Shiller reported on Tuesday. On Wednesday, the National Association of Realtors reported that sales of existing homes rose for the third straight month.
“At least it’s not a double whammy where both sales and prices are dropping,” said Stuart Hoffman, chief economist for PNC Financial Services Group. “Deals are getting done.”
That’s because 26% of all homes sold last year were foreclosures and short sales, according to a RealtyTrac report released on Thursday. That’s down slightly from 2009, but a jump compared to 2008.
Homes already foreclosed on and repossessed by banks, called REOs (real estate owned), sold for an average of 36% less than normal sales, RealtyTrac reported. Meanwhile, the discount for homes sold while they were still in the foreclosure process (short sales) was 15%.
Foreclosed properties sold for the biggest discount — 50% off — in New Jersey.
These homes have attracted bargain hunters, including individuals or groups looking to buy and hold properties, according to Hoffman. They hope to buy at such a good price that they can rent out the properties and make a profit.
“These folks are cash investors who are going in and offering very low bids,” he said.