Despite a recent jump in mortgage rates from historical lows, demand for homes continues to strengthen amid signs of a robust economy and surging stock market, according to the Redfin Housing Demand Index for January.
The seasonally adjusted index increased 6.5% from December to a reading of 130 in January, up 22.9% from the year-ago period and the highest level since Redfin started tracking the figure in January 2013.
The growth is due in part to a 25.9% jump from a year earlier in homebuyers requesting tours, and an 18% increase in the number of buyers making offers. Tightness in the market also lingers, with the number of homes down 13.4% from a year ago and with 4% fewer new listings.
Overall, tight inventory in many markets nationwide has residential construction in somewhat of a stasis, with lot and labor shortages, in addition to rising mortgage rates, preventing activity from taking off. Home prices hit a 30-month high in December, up 5.8% from a year ago and are 0.5% off the previous market peak in July 2006.
Reason for optimism in the demand pipeline came this month in the form of positive new- and existing-home sales reports. Nationwide, new single-family home sales rose 3.7% from December to a seasonally adjusted annual rate of 550,000 in January and are 5.5% ahead of the year-earlier pace, according to the Commerce Department. Meanwhile, the existing sales category turned out its strongest performance in a decade, up 3.3% in January to a rate of 5.69 million, 3.8% better than January 2016, the National Association of Realtors reported.
Still, tight inventory has hampered pending home sales since April 2016. The number of homes under contract in January fell 2.8% from December, according to the NAR. An increase in new construction activity can remove some of that burden. Single-family starts, one element of such a response, rose 1.9% in January to an annual rate of 823,000, but a volatile multifamily category pulled down the overall residential category to a rate of 1.246 million starts for the month.
Redfin’s report also noted that neighborhoods in and around the Maryland Area Regional Commuter rail system in Baltimore are seeing a pickup in activity as homebuyers are increasingly priced out of the booming Washington, DC, market.
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