Sales of previously owned homes, the largest category in the U.S. housing market, slipped for a second month in a row to the lowest annualized rate since September.
Purchase closings dropped 3.2 percent in January to a yearly pace of 5.38 million units, according to the National Association of Realtors. Sales had been expected to rise slightly to 5.60 million in the Bloomberg survey of analysts from the revised 5.56 million total in December. The median selling price rose 5.8 percent to $240,500.
The 5.72 million annual rate in November was the strongest reading in over a decade, since 5.46 million in March 2007, in the middle of the three year long collapse of the housing bubble which peaked at 7.25 million in September 2005.
The number of properties listed for sale sank 9.5 percent over the year to 1.52 million homes, the fewest for a January in the history of that statistic which began in 1999. At last month's selling pace it would take 3.4 months to clear the inventory, compared to 3.2 months in December and 3.6 month in January 2017. Historically the supply averages between six and seven months.
Shortage is particularly acute at the lower priced and first home levels where new construction has lagged far below the historical average despite its recovery from the all -time nadir of 2008 through 2012. In those five years the average number of new homes put up in the U.S each year fell below 800,000 annually, the lowest total in the 59 year record and that is without correcting for the increase in the American population over the past two generations.
Mortgage rates may also have played a part in the sales decline. The interest rate on a 30-year fixed mortgage, the most popular financing, rose last week to the highest in almost four years. Though the tax reform bill passed by Congress late last year limited the interest deduction for more expensive homes, it is not expected to affect the vast majority of home buyers.
The drop in January home closings, normally not a sales strong month, comes after home sales had the best year and quarter since the financial crisis in 2017, averaging 5.53 million units a month for the year and 5.59 million in the fourth quarter.
Sales fell in all four U.S geographic regions led by the 6 percent drop in the Midwest and 5 percent in the West.
Single-family home purchases decreased 3.8 percent to 4.76 million annually, the lowest since July 2016. Condominium and co-op sales, which are generally less expensive, rose 1.6 percent to 620,000 a year. First time buyers were 29 percent of total sales, down from 33 percent a year ago.
Existing home sales comprise 90 percent of the overall market and are recorded when the property changes hands at closing.
Chief Market Strategist
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Existing Home Sales
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