Mortgage rates have shot up 38 basis points since last November’s cyclical existing sales peak of 5.60 million. One would think that would translate into a dip in sales activity at the beginning of 2017.
Today’s report shows that was not the case. Existing sales jumped out to a fast start in 2017, increasing 3.3 percent in January and surpassing November as the strongest pace (5.69 million) since February 2007 (5.79 million).
For the most part, homebuyers have showed resilience in recent months by overcoming dearth supply levels and higher rates and home prices. Whether or not this can continue remains to be seen.
One uncomforting sign is that higher borrowing costs have yet to slow price growth, which increased last month (7.1 percent) to the fastest pace in a year (8.1 percent in January 2016).
Slower price gains and more inventory are the keys to watch heading into the spring. Demand remains high, but sales will only meaningfully increase if new and existing supply levels improve.
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