The 2018 spring home buying season could be even more competitive than last year's, marked by fewer listings, quicker sales, and a higher percentage of homes selling above the asking price in January, according to Redfin.
About 19.2% of homes sold above asking, up from 18.7% from a year ago, while the average sale-to-list price ratio reached 97.8%, an uptick from 97.6% year-over-year in January.
While January is generally a slow month for home sales, inventory is still tight. Home sales declined 7.9% annually, and the number of homes for sale in January fell 14.4%, the greatest year-over-year decline in 28 months.
"Sales volume is typically lowest in January, so while sales fell further than normal, it is not a major cause for concern," Taylor Marr, Redfin's senior economist, said in a press release. "Redfin agents in high-tax states reported that some buyers were hesitant in November and December given the uncertainty around tax reform, which passed in late December. This uncertainty contributed to the drop in January home sales."
Home prices rose 7.8% year-over-year in January, with the median sales price growing to $280,500. Houses that sold last month found a buyer after about 53 days on the market, which is six days faster than in January 2017.
Some potential move-up buyers are debating the logistics of listing their current home in the face of higher mortgage rates and less favorable tax treatment on their new home, according to Marr. Some homebuyers argued that lower deductions may be offset by other tax cuts, but those tax cuts won't affect buyers for a few months.
Still, tight inventory remains the biggest strain on the housing market.
"Many buyers are concerned about interest rates, but the biggest driver of this market is inventory, not rates," said Washington Redfin agent Joe Krupsaw. "None of my clients have said they'll change their plans to buy if rates increase. I think when rates hit 4.5% we'll see some buyers reassess their budgets and what they can afford, but they won't stop looking for a home."
San Jose, Calif., faced the largest overall decline in inventory, dropping 43.6% since last January. With an increase of 21.6%, the city also saw the third greatest rise in prices, showing tight supply continues to put upward pressure on home values.