NAR: Home sales increase 2.7% as property investors flash more cash

Existing home sales increased 2.7% in January, according to the National Association of Realtors, with cash sales taking an “abnormally” larger market share. NAR classifies existing home sales as completed transactions of single-family, town homes, condominiums and co-ops. The seasonally adjusted annual rate of these sales increased to 5.36 million in January, a 5.3% increase from a year ago. It’s the first time in seven months sales increased from the year before. NAR Chief Economist Lawrence Yun said the upward trend is matching improvement in the economy and jobs, but he blamed constricted lending for keeping sales from improving even more from December. NAR executives recently made trips to regulators and major lenders, asking them to ease these tighter restrictions put in place after the mortgage market crashed in 2008. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit,” Yun said. “As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.” All-cash sales increased to 32% of all sales in January from 29% in December. Investors are taking more market share, too. They accounted for 23% of all buyers in January, up from 20% the month before and 17% a year ago. Meanwhile, first-time homebuyers are on the decline. They made up 29% of the market in January, down from 33% in December and 40% a year ago when the homebuyer tax credit was still in effect. “Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand. With tight credit standards, it’s not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes,” Yun said. The median price for existing home sales was $158,800 in January, down 3.7% from a year ago as distressed homes maintained more than one-third of the market. There are currently 3.38 million existing home available for sale, which is a 7.6 month supply, down from 8.2 months in December. A healthy market usually has six months of inventory, but the levels in January are the lowest since December 2009 when it was at 7.3 months. Write to Jon Prior. Follow him on Twitter: @JonAPrior