Continue Reading Below
The National Association of Realtors said Friday that sales of existing homes slipped last month to a seasonally adjusted annual rate of 5.46 million. Sales have climbed 9.6 percent over the past 12 months as borrowing costs have fallen. But sales could be squeezed in the coming months because of a shortage of homes listed for sale.
|XHB||SPDR SERIES TRUST SPDR S&P HOMEBUILDERS ETF||56.16||-1.18||-2.06%|
Just 1.42 million homes were on the market at the end of January, a 10.7 percent decline from a year ago. With fewer homes for sale, would-be buyers have fewer options and prices are rising faster than wage growth.
The median sales price in January was $266,300, up 6.8 percent from a year ago.
Five million Millennials are turning 30 this year, and half of the homes bought in America are being purchased by Millennials, so demand is soaring while supply is sinking. But Nicholas Wealth Management president David Nicholas told FOX Business' Stuart Varney on Friday this equation means "it's really a perfect setup for higher home prices."
A solid economy and low mortgage rates are boosting demand for housing. Workers have an increased sense of security with the unemployment rate hovering near a half-century low at 3.6 percent.
"We have rising wages, a strong economy; we have Millennials that are out buying, so there's a lot of positive factors here," Nicholas said on "Varney & Co."
A recent study showed people are staying in their homes for longer. In 2010, people were staying in their homes for an average of eight years, but now, they are staying an average of 13 years.
The average interest rate charged on a 30-year mortgage was 3.49 percent this week, down from 4.35 percent a year ago, according to mortgage buyer Freddie Mac. Nicholas said the lower interest rates are causing people to stay in their homes longer.
"Many Americans have refinanced their home many times over the last 10 years," Nicholas mentioned. "I think once you see some of those that have been staying in their homes starting to sell or decide to move, I think we'll see another boom."
Nicholas maintained despite the supply issue, it's still a great time for young Americans to be entering the housing market because of the strong economy.
"I say, 'buy now' because, every day you wait, in my opinion, rates could go higher and home prices are going higher, so I think this is a perfect time to buy, and I think you'll see a strong start beginning this spring," Nicholas explained.
The Associated Press contributed to this report.