It’s early days for the 2022 housing market, but new data shows that homebuyers are already out in the real estate race. The average home sold faster in the first month of the year than in any previous January, according to Realtor.com’s monthly housing report released today.
Compared to January’s national pace, homes sold faster in the 50 largest metros, with listings flying off the market in 36 days or less in Nashville, San Diego, San Jose, California, Denver and Raleigh, North Carolina.
“We’re predicting an upcoming year for buyers, and if January’s housing trends are any indication, the race for 2022 is already heating up,” said Danielle Hale, chief economist at Realtor.com. “January’s fast pace of home sales suggests buyers are more active than usual this year. But it’s a different story on the other side of the closing table, with new seller listings continuing to decline in January. Uncertainties like Omicron could make sellers hesitate even if they know housing conditions are favorable.” .
Hale added, “Another key obstacle is the ‘chicken-and-egg’ dilemma that can plague buyers: With home buyers hungry for more options, do they list now or wait for more inventory to hit the market in the spring?” “Ultimately, only you know the best time to move for your family, but preparation to act quickly when the right opportunity presents itself is key.”
Reflecting the mixed effects of 2021’s tepid buyer demand and feverish pace of home sales, time on the market both set new records and gave buyers their first reprieve in January. On the one hand, the typical home spent less time on the market than it did before January, and a whole month less than it did before the pandemic in 2017-2019. At the same time, with recent trends following typical seasonal patterns, national time on the market in the final month of 2021 increased in January.
The average home spent 61 days on the market in January, compared to December’s pace (54 days). However, homes have spent less time on the market since January 2021 (-10 days) compared to the same month in 2017-2020, on average (-29 days).
Homes spent an average of 52 days on the market in January in the 50 largest U.S. metros, less than the national average. Southern metros posted the largest annual decline in time on market, down 10 days overall in the region and Miami (-29 days), Orlando, Fla. (-24 days) and Raleigh, NC (-17 days) lead.
- Time on market in January increased over last year in four major markets: Hartford, Conn. (+10 days), Minneapolis (+2 days) and Richmond, Virginia (+1 day) and Washington, D.C. (+1 day).
Limited inventory creates challenges for buyers and prospective sellers
While buyer activity in 2022 is accelerating earlier than in previous years, January data suggests sellers are not on the same timeline. The annual decline in inventories widened for the fourth consecutive month as new listings continued to fall below prior-year levels. This is partly due to seasonality, as sellers historically wait until spring to enter the market. However, the decline in new listings for January could indicate that some prospective sellers are delaying their initial plans to list earlier in the year, as 65% of those surveyed in the fall survey are expected to list by March 2022.
A number of possible reasons could be behind the seller’s hesitancy, from Omicron’s instability to a decade-long lack of new construction, with many sellers facing limited options in January when they need to buy their next home.
- Nationally, inventory of active listings fell 28.4% year-over-year in January, an increase from the previous month’s pace (-26.8%). Although there were fewer homes for sale in all 50 largest metros than in January 2020, more than half (26) posted fewer inventory declines than the national average.
- New listings lagged behind last year’s levels for the second month in a row in January, down 9.1% nationally. However, annual declines in new listings improved steadily during the month. If this trend continues, buyers may begin to see more options before the competitive spring season.
- Among the 50 largest metros, 19 experienced fewer new sellers than the national rate in January. Additionally, four markets posted annual new listings: Cleveland (+7.6%); Indianapolis (+1.6%), Houston (+0.9%) and Orlando, Florida (+2.3%).
As fuel competition increases, home price growth will continue at a double-digit pace
Average list prices held near record highs and continued to rise at a double-digit annual rate in January as demand outpaced supply. With 2022 forecast to be a seller’s market, annual home price growth is expected to slow from 2021. This is due in part to rising prices, which have reduced buyers’ ability to afford higher asking prices and are starting to rise faster than expected.
Listing price data is already showing some loss of momentum, as momentum was slower in January than in December. Still, the affordability of monthly housing costs is a concern for buyers—especially first-time buyers, who typically have less flexible budgets and face the financial burden of increasing rent.
For the second month in a row, the median list price held at $375,000. List prices rose at a slightly faster annual rate in January (+10.3%) compared to December (+10.0%), but the change was smaller than in November (+8.6%) to December.
Relative to the national level, home prices in the 50 largest metros posted the smallest annual gain (+6.1%), due in part to inventory gains in smaller-sized homes. Price growth per square foot was similar, at 11.8% year-over-year in major metros and 13.5% year-over-year nationally.
List prices grew at double-digit annual rates in the South (+11.2%) and West (+10.0%) regions, which led the list of five markets with annual home price increases: Las Vegas (+35.3%), Tampa (+28.7%), Austin, Texas (+28.2%), Orlando (+25.0%) and Miami (+24.8%).
For the first time since the start of the pandemic, the national overall delinquency rate fell below the March 2020 low of 3.6 percent, a sign that mortgage performance is keeping pace with the nation’s income growth, according to analytics and data provider CoreLogic. At the same time, mortgage rates remain at historic lows as borrowers are able to tap into the equity created in a year of record-breaking home price growth. Together, these factors helped borrowers weather the lasting economic impact of the pandemic and avoid falling behind on payments or losing their homes.
“Non-farm employment rose by 6.45 million in 2021, helping to rebuild incomes for households that were struggling financially during the pandemic,” said Frank Nothhaft, chief economist at CoreLogic. “Income growth has helped lower prices and the building of home equity has reduced the likelihood of distressed sales for families facing financial difficulties.”