WASHINGTON – Sales of existing U.S. homes plummeted in January to the worst pace in 18 months. Cold weather, limited supplies of homes on the market and higher buying costs held back purchases.
The National Association of Realtors said Friday that sales fell to a seasonally adjusted annual rate of 4.62 million units last month. That was down 5.1 per cent from the December pace. The sales rate declined 5.1 per cent over the previous 12 months.
Higher mortgage rates and higher prices have contributed to a slowdown in home buying in five of the past six months. Freezing temperatures and snowstorms have also caused most housing activity to slip this winter. The flagging sales suggest a deceleration from the momentum for much of 2013, when 5.09 million homes were sold, the most in seven years.
“Such a picture confirms that the U.S. housing market reached its peak at the end of 2013 and further reacceleration is unlikely near term,” Annalisa Piazza of Newedge Strategy said in a research note.
Home building dipped 16 per cent in January from December, the Commerce Department said this week. Signed contracts to buy homes plunged in December, foreshadowing the January drop-off, the Realtors said in a separate report.
The weather has kept would-be buyers from venturing to open houses, while construction crews have endured work stoppages.
But sales also declined in parts of the country where weather was less of a factor. This suggested that price pressures and tight inventories are also weighing on the real estate market.
Buying fell 7.3 per cent in Western states, the region less affected by winter storms and where average prices are the highest. That decline was significantly larger than in the Northeast, South and Midwest. The median price of homes in the West is $273,500, almost double the median price in the Midwest.
The median price nationwide has risen 10.7 per cent to $188,900 since January 2013. There are just 4.9 months of available inventory on the market, a sign that would-be buyers have relatively few homes to pick from and may choose to delay purchases.
Just 26 per cent of sales last month were by first-time buyers. In a healthy market, that figure is closer to 40 per cent. All cash-sales accounted for 33 per cent of all purchases, evidence that investors continue to make up a sizable share of the sales.
Existing-home sales in a healthy market would approach 5.5 million, nearly 900,000 more than the January rate. Buying has slowed during the past six months.
Over the summer of 2013, home resales reached a pace of 5.39 million. But they began to slow in September as the costs of buying a home rose because of rising prices and higher mortgage rates.
The average rate on a 30-year mortgage rose to 4.33 per cent this week from 4.28 per cent the previous week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 per cent. The increase began after the Federal Reserve signalled that it would start to slow its bond-buying program before the end of the year.
The Fed has reduced its monthly bond purchases from $85 billion to $65 billion in its last two policy meetings. The purchases are intended to push down longer-term interest rates and encourage more borrowing, spending and hiring.