Existing Home Sales Rise as Inventory Reaches 13-year Low

By Stevie Duffin Updated on 2/21/2013

By Daniel Duffield

Sales of existing homes in the U.S. grew in January, leaving the national inventory of homes at its lowest level within the past 13 years and indicating that the housing market recovery is picking up speed.

On Thursday, the National Association of Realtors stated that existing home sales increased 0.4% last month, reaching a seasonally adjusted annual pace of 4.92 million units. This figure represents the second highest pace of sales since November 2009, in which home sales increased as a result of the expiration of a federal tax credit for home buyers.

Experts surveyed by Reuters projected a 4.9 million unit rate, and these statistics surpassed their expectations.

In concurrence with the recession that struck the U.S. economy between 2007 and 2009, the housing market made a substantial downturn that it has yet to entirely recuperate from; however, consistent job growth strengthened the housing market in 2012, along with the spurring of forward movement in the economy for the first time since 2005.

The nation’s supply of existing homes on the market, which is not adjusted for seasonal changes, declined 4.9% from December to 1.74 million, reaching the lowest inventory since December 1999.

A large number of Americans have withheld selling their homes due to owing more than the value of their properties, representing a portion of the housing inventory that may be freed up in the event that HARP 3 is established. However, the significant decline in housing inventories within the past year have prompted developers to construct more homes, and many professionals anticipate that home building will bolster the economy even more in 2013 than in 2012.

Inventories have fallen 25.3% compared with January 2012 figures.

Given the current rate of sales, the U.S. housing inventories would be depleted in 4.2 months, the lowest estimate since April 2005.

As a principle of supply and demand, the scarce housing inventories have applied pressure on home prices, presently pushing them higher.

Nationally, the median home resale price amounted to $173,600 in January, rising 12.3% from January 2012 levels.