Existing Home Sales Soar as Buyers Panic Ahead of Rate Hikes

Home buying picked up as interest rates started to rise in January ahead of the Federal Reserve’s anticipated March rate hike.

Existing-home sales increased by nearly 7 percent between December and January to a seasonally-adjusted, annual rate of 6.5 million, the National Association of Realtors said Friday.

Economists expected the pace of home sales to come in at 6.1 million, unchanged from the previous month.

The Fed is widely expected to raise its target interest rate in March, although investors have been divided about how big of a hike might be on the way. A week ago, derivatives prices implied 50 percent chance of a 50 basis point hike. On Friday, the odds of a hike that large hard dropped to just 17 percent.

Housing inventory has been declining sharply. In January, inventory dropped to just a 1.6 month supply, a record low. A “balanced” market is considered to have a four to six months supply.

Prices of houses, like many other things, are soaring. The median sales price for an existing home was up 15 percent on an annual basis to $350,300. The supply of homes priced below $500,000 has cratered.

“There are more listings at the upper end – homes priced above $500,000 – compared to a year ago, which should lead to less hurried decisions by some buyers,” Yun said in the report. “Clearly, more supply is needed at the lower-end of the market in order to achieve more equitable distribution of housing wealth.”

The average rate for a 30-year fixed-rate mortgage was 3.92 percent as of Friday, up from 3.11 percent at the end of December.

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