WASHINGTON -- The housing market is flashing signs of health ahead of the spring buying season.
Sales of previously occupied homes are at their highest level since May 2010. More first-time buyers are making purchases. And the supply of homes fell last month to its lowest point in nearly seven years, which could push home prices higher.
Sales have now risen nearly 13 percent over the past six months. While they are still well below the 6 million that economists equate with a healthy market, the gains have coincided with other changes in the market that suggest more sales are coming.
"The trend is clearly upward," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The National Association of Realtors said Wednesday that re-sales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million.
Single-family home sales rose 3.8 percent. And the number of first-time buyers, who are critical to a housing recovery, increased slightly to make up 33 percent of all sales. That's still below 40 percent, which tends to signal a healthy market.
One concern is that the market is still saturated with homes at risk of foreclosure, which can lower home prices generally. Those increased to make up 35 percent of sales.
But the supply of homes on the market has plunged to 2.3 million, the lowest level since March 2005. At last month's sales pace, it would take more than six months to clear those homes, consistent with a healthy housing market. Fewer homes on the market could help boost prices over time.
Most economists said the January report was encouraging, especially when viewed with other recent positive housing data.
Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year -- and they responded in January to that interest by requesting more permits to construct single-family homes.
Most Popular Housing Markets
Home Sales Sunnier as Spring Buying Season Approaches
Median List Price: $186,000
Total Listings: 53,009
Median Age of Inventory: 138 days
Home Price: $4.995 million
Sq. Ft.: 12,000
Users of Realtor.com searched for homes in Chicago more than any other city in January. With a little over 53,000 homes for sale, the city has ample supply for house hunters.
Behind this luxury home's brick and limestone exterior, is a whopping 12,000 feet of space. The listing description claims the house offers just the right balance of public and private spaces.
Median List Price: $81,700
Total Listings: 22,370
Median Age of Inventory: 70 days
Home Price: $290,000
Sq. Ft.: 2,800
Speaking volumes to the affordability of Detroit housing, not one of Realtor.com's Detroit listings is priced above $1 million.
This $290,000 home is high-end as far as the city's market goes. The apartment, which features waterfront views, dates back to Detroit's heyday when the American automobile industry was firing on all cylinders.
Median List Price: $320,444
Total Listings: 26,858
Median Age of Inventory: 83 days
Home Price: $10.95 million
Sq. Ft.: 13,699
Los Angeles' median home price may tower over the national median (which is below $200,000); but in coming in at No. 3 on our list, that apparently hasn't stopped prospective buyers from scouring the city's listings.
This spanking-new, palatial mansion features floor-to-ceiling windows that display the home's jaw-dropping panoramas for all they're worth.
Median List Price: $221,995
Total Listings: 21,693
Median Age of Inventory: 124 days
Home Price: $4,898,100
Sq. Ft.: N/A
Philadelphia's median home price hovers above the national median by a considerable margin. The city has one of the highest average inventory ages on our list. That may induce more sellers to cut their prices.
Median List Price: $169,500
Total Listings: 17,699
Median Age of Inventory: 69 days
Home Price: $2.75 million
Sq. Ft.: 6,917
Phoenix-Mesa, bringing cheaper than average homes to the home-buying table, is fifth on our list. Perhaps luring flocks of bargain hunters, the area's homes are selling significantly faster than in most cities.
This contemporary has a well-landscaped courtyard and guesthouse. The listing description plays up the home's privacy, which makes the home "feel miles away."
Median List Price: $142,000
Total Listings: 18,827
Median Age of Inventory: 110 days
Home Price: $3,999,999
Sq. Ft.: 6,763
Florida is one of the states hit hardest by the the housing bust with rampant foreclosures driving down home prices all around the state. So it's no surprise that buyers have the Tampa-St. Petersburg-Clearwater area in their crosshairs.
This magnificent waterfront manse sits on some prime Tampa real estate. Price per square foot? $591. While that may strike you as exorbitant, keep in mind, pre-meltdown, this place's value surely dwarfed its current price tag.
Median List Price: $189,900
Total Listings: 16,291
Median Age of Inventory: 94 days
Home Price: $6.495 million
Sq. Ft.: 5,025
Dallas' median home price hovers around the national median, rendering it a fairly affordable city to your average American.
This home, however, is not affordable to your average American -- but, hey, it's fun to look at. The contemporary sits on a one-acre lot that stares out at the Dallas skyline. Recently, the home's price was slashed to $6.49 million.
Median List Price: $121,000
Total Listings: 21,665
Median Age of Inventory: 105 days
Home Price: $8 million
Sq. Ft.: 13,489
Las Vegas took one of the biggest shellackings from the bursting of the real estate bubble, with its median home price plunging by more than 60 percent. It would seem that buyers are keen on taking advantage of the rock-bottom prices.
This massive luxury home almost certainly used to be worth well over $10 million. Now the 13,489-square-foot behemoth is running for $8 million.
"The rise in existing home sales in recent months adds to the indication from housing starts, building permits, and homebuilder sentiment that the sector has improved modestly since the middle of 2011," said John Ryding, an economist at RDQ economics.
Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs -- the most in nine months -- and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.
Analysts caution that the damage from the housing bust is deep and the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.
Many deals are also collapsing before they close. One-third of Realtors say that they've had at least one contract scuttled over the past four months. That's up from 18 percent in September.
Realtors say deals are collapsing for several reasons: Banks have declined mortgage applications. Home inspectors have found problems. Appraisals have come in lower than the bid. Or a buyer suffered a financial setback before the closing.
Sales rose across the country in January. They rose on a seasonal basis by nearly 9 percent in the West, 3.5 percent in the South, 3.4 percent in the Northeast and 1 percent in the Midwest.
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