Sales of previously-owned homes rose in January to the highest level since May 2010, but prices continued their decline as the give-and-take housing recovery continued. Purchases were up 4.3 percent to a 4.57 million annual rate last month, from a revised 4.38 million pace in December that was slower than previously estimated, the National Association of Realtors reported today in Washington.

Record affordability driven by low home prices and mortgage rates helped drive sales, pushing down inventories, but the Federal Reserve and the Obama administration remain concerned that mounting foreclosures will hinder the recovery. The two are striving to find ways to lend the industry additional assistance.

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Existing-home sales climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the height of the housing boom, but fell to 4.1 million in 2008, the least since 1995.

The number of previously-owned homes on the market fell to 2.31 million last month, the fewest since March 2005. At the current sales pace, it would take 6.1 months to sell all of those houses, the fewest since April 2006. Meanwhile, the median price of a previously-owned home fell 2 percent to $154,700 from $157,900 in January 2011. The median price dropped to $166,100 last year, the lowest since 2002, from $172,900 in 2010.

Existing single-family home sales rose 3.8 percent in January to an annual rate of 4.05 million, while purchases of multifamily properties, including condominiums and townhouses, rose 8.3 percent to a 520,000 pace. Total purchases, of both single-family and multifamily properties, rose in all four U.S. regions measured by the NAR. The West led with an 8.8 percent gain, followed by a 3.5 percent increase in the South.

Cash transactions accounted for about 31 percent of all purchases last month, investors accounted for 23 percent, and first-time buyers accounted for 33 percent. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 35 percent of purchases in January.

The improving jobs market has no doubt been a boon for home sales, but greater affordability is also supporting demand. The NAR’s measure of whether households earning the median income can afford a median-priced house at current interest rates reached record levels in the last three months of 2011.

But while policymakers are working to help distressed homeowners, Federal Reserve Chairman Ben Bernanke said the central bank’s efforts to spur growth are being hindered by tighter lending standards and high foreclosures. According to RealtyTrac Inc., more than 14 million U.S. homes are currently at some stage in the foreclosure process, behind on their mortgages, or owe more than their properties are worth.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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