Home sales rose 4.3% in January, marking three gains in the past four months, while the inventory of unsold homes continued to fall, according to the NATIONAL ASSOCIATION OF REALTORS®.

The data shows buyers are finally responding to favorable market conditions, said NAR Chief Economist Lawrence Yun. “The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation, and rising rents,” he said.

The inventory of unsold homes fell 0.4% in January to 2.31 million, a supply that would take 6.1 months to sell at the current pace. That continues a downward trend from a record 4.04 million homes on the market in July of 2007.

“The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers,” Yun said. “Foreclosure sales are moving swiftly, with ready home buyers and investors competing in nearly all markets. A government proposal to turn bank-owned properties into rentals on a large scale does not appear to be needed at this time.”

Buying power is enticing more potential home buyers into the market, said NAR President Moe Veissi. “Our members are reporting an increase in foot traffic compared with a year ago,” he said.

Home prices down

The national median existing-home price was $154,700 in January, down 2.0% from January 2011. 

Distressed homes — foreclosures and short sales which sell at deep discounts — accounted for 35% of January sales (22% were foreclosures and 13% were short sales), up from 32% in December; they were 37% in January 2011.

“Home buyers over the past three years have had some of the lowest default rates in history,” Yun said. “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”

All-cash sales were unchanged at 31% in January; they were 32% in January 2011. Investors, who make the bulk cash purchases, bought 23% of the homes sold in January, up from 21% in December. First-time buyers purchased 33% of the homes sold in January.

Getting deals to the closing table continues to be a challenge. While 47% of NAR members report that contracts settled on time in January, 21% had delays, and 33% experienced contract failures.

By contrast, only 9% of contracts failed in January of 2011. This year, consumers are having a harder time getting mortgages, and appraisers are valuing homes at less than the contract price, causing deals to fall apart, NAR members said.

Single-family and condo sales

Single-family home sales rose 3.8% in January and are 2.3% above a year ago. The median existing single-family home price was $154,400 in January, down 2.6% from January 2011.

Existing condominium and co-op sales increased 8.3% in January but are 10.3% lower than they were in January 2011. The median existing condo price was $156,600 in January, up 2.0% from a year ago.

Regional home sales

Regionally, existing-home sales in the Northeast rose 3.4% to an annual pace of 600,000 in January and are 7.1% above a year ago. The median price in the Northeast was $225,700, which is 4.2% below January 2011.

Existing-home sales in the Midwest increased 1.0% in December to a level of 980,000 and are 3.2% higher than January 2011. The median price in the Midwest was $122,000, down 3.9% from a year ago.

In the South, existing-home sales rose 3.5% to an annual level of 1.76 million in January but are unchanged from a year ago. The median price in the South was $134,800, which is 0.3% below January 2011.

Existing-home sales in the West jumped 8.8% to an annual pace of 1.23 million in January but are 3.1% below a spike in January 2011. The median price in the West was $187,100, down 1.8% from a year ago.

Source: NAR