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 The National Association of Realtors said on Friday that home sales
dropped 5.1 percent last month to an annual rate of 4.62 million
units, the lowest level since July 2012.
The Realtors group said unseasonably cold weather was partly to
blame, but it also acknowledged some fundamental weakness, with
fewer homes on the market to choose from and higher mortgage rates
and prices reducing affordability.
"Some housing activity will be delayed until spring," said Lawrence
Yun, NAR chief economist. "At the same time, we cannot ignore the
ongoing headwinds of tight credit, limited inventory, higher prices
and higher mortgage interest rates."
The 30-year fixed mortgage rate is about a full percentage point
higher than it was a year ago, even though rates have come down a
bit since hitting a two-year high in September.
Sales tumbled in the Northeast, South and Midwest, which were hit by
snow storms and ice last month. But they were down 7.3 percent in
the West, an indication that other factors apart from the weather
also weighed on sales.
Home resales, which peaked in July, have declined in five of the
last six months, and in January were down 5.1 percent from a
year-ago.
Economists had expected sales to fall to a 4.68-million pace last
month and some were not convinced that the weather had played a
major role in the January slump.
"The weakness in existing home sales has been going on for some time
now and needs to be acknowledged, particularly by the Federal
Reserve," said Diane Swonk, chief economist at Mesirow Financial in
Chicago.
"The few hawks on the Fed could be quickly silenced if housing
doesn't turn around in a more definite and fundamental fashion
soon."
The U.S. central bank has been reducing the amount of money it pumps
into the economy through monthly bond purchases, and minutes of the
Fed's last meeting in January showed some officials thought it might
be appropriate to raise interest rates "relatively soon."
ROOM FOR OPTIMISM
Freezing temperatures have hurt home building, manufacturing and
hiring in December and January.
While most analysts see the weather-driven slowdown in economic
activity as temporary and expect growth to rebound in the second
quarter, there are growing concerns that there may be some
underlying weakness in the economy, particularly given that growth
was already slowing towards the end of 2013.
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Some economists are optimistic home resales will pick-up once the
weather starts warming up.
"Although higher mortgage rates and prices have reduced
affordability somewhat, it is still much better than it was at the
height of the housing boom," said Gus Faucher, a senior economist at
PNC Financial in Pittsburgh.
"Many potential buyers, concerned about their financial situation,
have put off purchases, but are now looking to buy a home as the
recovery has proceeded."
In January, the inventory of unsold homes on the market rose 2.2
percent from December, pushing the months' supply to 4.9.
While that was up from December's 4.6 months, it remained below the
6.0 months that is normally considered as a healthy balance between
supply and demand.
With inventory still tight, the median price for a previously owned
home rose 10.7 percent from a year ago.
Higher house prices and lack of stock were slowing sales in the
lower end of the market. First-time buyers accounted for 26 percent
of the transactions, the smallest share since the Realtors group
started tracking the series in October 2008.
A market share of 40 percent to 45 percent is considered by
economists and real estate professionals as ideal.
The NAR, however, believes the worst of the supply squeeze is over,
noting that the stock of unsold homes increased 7.3 percent from a
year ago.
(Reporting by Lucia Mutikani; editing by
Andrea Ricci)
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