Sales of formerly owned U.S. homes dropped in January to the lowest level in over a year as extreme winter weather combined with a shortage of supply, tight credit and decreasing affordability impacted demand.
Purchases decreased 5.1 percent to a 4.62 million annual rate last month, the least since July 2012, figures from the National Association of Realtors. The median forecast of 79 economists surveyed by Bloomberg projected sales would certainly go down to a 4.67 million rate. Sales fell in all 4 regions of the nation.
The figures show closings on contracts signed months earlier and highlight how higher borrowing costs and property prices have slowed momentum in residential real estate. More progress in the labor market that produces stronger wage growth would help repair demand.
“It’s likely the weather played some role, but just as much of a role was played by lower inventories, higher mortgage rates, somewhat higher prices and tighter credit,” said Robert Rosener, an economist at Credit Agricole CIB in New York, who appropriately projected the drop in sales.
Estimations in the Bloomberg survey of economists stretched from a sales pace of 4.5 million to 4.9 million. December’s figure was unrevised at a 4.87 million pace.
Contrasted with a year earlier, purchases dropped 5.1 percent in January on an adjusted basis.
The median price of an existing home appreciated nationally 10.7 percent from a year earlier to $188,900 in January.
NAR released its annual revisions affecting data over the past three years. Sales amounted to 5.09 million in 2013, the same as formerly estimated.
The poor weather wasn’t completely to blame for the drop in activity, Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released. “Lack of inventory is plainly one of the factors. Buyers wish to see more options.”.
The existing home-sales decline was led by a 7.3 percent drop in the West, and a 7.1 percent decrease in the Midwest.
First-time buyers accounted for only 26 percent of all purchases in January, the lowest since record keeping began in October 2008.
The number of existing properties on the market increased 7.3 percent from a year earlier to 1.9 million in January. At the present pace, it would certainly take 4.9 months to offer those houses compared to 4.6 months at the end of December.
The median time a home was on the market was 67 days in January compared with 72 days the same month last year.
The numbers also show some divergence in the market as the quantity of sales of lower-priced homes are going down, mainly due to a lack of supply, while demand for higher-priced properties is climbing up, reflecting the rebound in wealth triggered by increasing stock prices.
The split is also evident in the structure of properties sold, he said. Purchases of single-family homes decreased 5.8 percent to an annual rate of 4.05 million, the report revealed.
Existing-home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008, three years right after a record 7.08 million homes were sold.
Inclement weather in the eastern U.S. risks further limiting the housing market. Last month was the coldest January since 1994 in the contiguous U.S., built upon gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland. The Northeast is experiencing the coldest winter since 1982, measured from December to February, the team said.
The rate of home construction fell 16 percent to an 880,000 annualized rate last month, the biggest decrease from February 2011, Commerce Department data revealed last week.
Builder confidence also slumped as the weather decreased both possible buyer traffic and sales. The National Association of Home Builders/Wells Fargo sentiment gauge dropped to 46 this month from 56 in January, the biggest downturn since monthly record-keeping began in 1985. Readings less than 50 mean more respondents mentioned poor market conditions than good.
Aside from weather, buying a home has become less affordable. The 30-year fixed mortgage rate 4.33% in the week ended Feb. 20, up from 3.56 percent around the same time a year ago. After hitting a four-month low of 4.10 percent at the end of October, the average rate jumped to 4.53 percent at the beginning of this year.
“If you recall back a couple quarters ago, there was a very adverse response to the boost in mortgage rates, even though they were slight and they’re still historically low by anybody’s standards,” Donald Tomnitz, chief executive officer of DR Horton Inc., said on a Jan. 28 phone meeting. As spring approaches, rates “will be less and less a factor.”.