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Existing-Home Sales on Solid Footing to Start 2016

for-saleAfter suffering a major drop in November 2015 and recovering with the largest monthly increase ever recorded in December, existing-home sales seem to have found their balance to start the new year.

Many economists in the mortgage industry felt was November's slump was just a temporary fallback for a huge comeback from the backlog of mortgage purchases during the implementation of the “Know Before You Owe” mortgage rule, commonly known as the TILA-RESPA Integrated Disclosure (TRID) rule, which went into effect on October 3, 2015.

Today's existing-home sales report from the National Association of Realtors (NAR) proves that lenders are well on the path to recovery from TRID delays.  The report found that existing-home sales increased 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Existing sales are now 11.0 percent higher than a year ago, the highest annual rate in six months and the largest year-over-year gain since 16.3 percent July 2013.

"The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," said Lawrence Yun, NAR Chief Economist. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."

Ralph B. McLaughlin, Chief Economist at Trulia noted that the "modest increase is likely due exceptionally high levels of home sales in December. A large number of expected November homes sales spilled over into December because of delayed closings caused by TILA-RESPA ­ "Know Before You Owe" lending regulations. This caused the normal volume in January to look comparatively small."

Existing Home Sales January 2016

Source: National Association of Home Builders

"The surprise rise in existing home sales in January provides further evidence that housing demand is being supported by very low mortgage interest rates and a strong jobs market," said Matthew Pointon, Property Economist at Capital Economics. "But with inventory levels very low, that has put upwards pressure on house prices."

According to the NAR, the median existing-home price in January was $213,800, up 8.2 percent from last January's median price of $197,600. Housing inventory rose 3.4 percent to 1.82 million existing homes available for sale, but is still 2.2 percent lower than a year ago when inventory totaled 1.86 million. Inventory levels remain low at a 4.0-month supply, up slightly from 3.9 months in December 2015.

Realtor.com Chief Economist Jonathan Smoke said, "In conditions of tight supply, home values have strong support, but potential buyers will continue to face challenges finding a home for sale that meets their needs. We’re not seeing evidence of the stock market’s declines in January and early February slowing down the pent-up demand primed to buy this spring.  In fact the weakness in the financial markets has given buyers another shot at lower mortgage rates, as the average 30-year fixed mortgage is down over 40 basis points from the end of 2015 and solidly back under 3.70 percent."

Click here to read the full report.

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