The U.S. housing sector strengthened at the start of 2017, a sign that pent-up demand and strong job creation were offsetting a steep rise in mortgage rates since November.
The sale of existing homes rose 3.3% to a seasonally adjusted annual rate of 5.69 million in January, the National Association of Realtors (NAR) said in a report on Wednesday. That was higher than the median estimate, which called for a gain of 1.1%.
The median sales price for existing homes rose 7.1% year-over-year to $228,900. That was the fastest increase since last January, marking the 59th consecutive month of gains. December sales were revised to reflect a 1.6% drop compared to the 2.8% decline reported previously.
Housing inventory, which measures the number of homes available for sale, rose 2.4% to 1.69 million. Despite the gain, inventories are down 7.1% from a year earlier. Tight inventories have been largely responsible for the strong uptrend in prices recently.
“Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” Lawrence Yun, NAR chief economist, said in a statement. “Market challenges remain, but the housing market is off to a prosperous start.”
U.S. mortgage rates have risen sharply since Donald Trump was elected President on November 8. Rates climbed to more than two-year highs in December after the Federal Reserve raised interest rates for only the second time in a decade. The average rate on a fixed 30-year mortgage spiked to 4.32% in the week ended December 29, according to Freddie Mac. Rates were as low as 3.41% earlier in the year.
Mortgage rates averaged 4.15% in the latest week, Freddie Mac said in its most recent report.
Mortgage rates are being pulled higher by expectations of faster policy tightening by the Fed. The U.S. central bank voted against raising rates in its first meeting of 2017, but is widely expected to raise again in the summer. Policymakers are keeping a close eye on inflation now that Trump is President.
Steady home sales in a rising interest rate environment points to a resilient economy that is benefiting from plentiful jobs and higher wages. That was the key takeaway from last month’s official nonfarm payrolls report, which showed the creation of 227,000 jobs in January. Investors were expecting a gain of around 175,000. Average hourly earnings climbed 2.5% annually.
Earlier this month, the Labor Department also said consumer inflation surged to nearly four-year highs at the start of 2017, a sign earnings are also accelerating.
A separate measure of layoffs in the labor market also suggests wages could be headed higher. Initial jobless claims approached 43-year lows earlier this month, and have now remained below 300,000 for 102 consecutive weeks. That’s the longest stretch since 1970.
 National Association of Realtors (February 22, 2017). Existing Home Sales Jump in January.
 Preshant Gopal (December 22, 2016). “U.S. Mortgage Rates Jump to More Than 2-Year High After Fed Hike.” Bloomberg.
 Reuters (February 9, 2017). “US jobless claims drop to near 43-year low.” CNBC.
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