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February 21, 2018

Inventory shortage continues to restrict existing-home sales

January existing-home sales were down 4.8 percent from a year ago, which marks the largest annual decline since August 2014. NAFCU Research Assistant Yun Cohen noted in a NAFCU Macro Data Flash report Wednesday that inventory has declined year-over-year for 32 consecutive months.

"While demand remains strong, the lack of inventory continues to constrain sales," Cohen said. "According to the [National Association of Realtors], January's inventory count was the lowest for the month since the association began tracking in 1999. Inventory shortages are expected to persist in 2018."

Existing-home sales decreased 3.2 percent in January to a seasonally adjusted annual rate of 5.38 million.

Sales declined in all four regions during January: sales in the Midwest fell 6 percent, followed by the West (-5 percent), Northeast (-1.4 percent) and South (-1.3 percent).

Based on current sales, there were 3.4 months of supply at the end of January, up from 3.2 months in December. Analysts consider six months of supply to be roughly balanced between supply and demand. Although inventory rose 4.1 percent in January, it was still 9.5 percent lower than a year ago.

The median existing-home price decreased from $246,500 in December to $240,500 (not seasonally adjusted) in January. This is 5.8 percent higher than the median price from a year ago.

Cohen also said that "rising borrowing costs and more limited deductibility of property tax could further hurt affordability," but expected "modest sales growth overall for the year" because of the healthy economy.

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