Sales of previously owned homes dropped in January to the lowest level in more than a year as harsh winter weather combined with a lack of supply, tight credit and declining affordability slowed demand.
Purchases decreased 5.1% to a 4.62 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of 79 economists surveyed by Bloomberg projected sales would drop to a 4.67 million rate. Sales fell in all four regions of the country.
The figures reflect 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 generates stronger wage growth would help reinvigorate demand.
“It’s hard to separate the weather effect from the fundamentals, but housing is still reasonably healthy here in recovery mode,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in an interview before the report. “Maybe some of the strength we saw in the latter part of last year was a little overdone and there may have been a bit of a correction anyway, and weather exacerbated that.”
Stocks held earlier gains after the report. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,845.06 at 10:03 a.m. in New York as Hewlett-Packard Co. and Priceline.com Inc. results topped estimates.
Estimates in the Bloomberg survey of economists ranged from a sales pace of 4.5 million to 4.9 million. December’s figure was unrevised at a 4.87 million pace.
Compared with a year earlier, purchases decreased 5.1% in January on an adjusted basis, today’s report showed.
The median price of an existing home increased 10.7% from a year earlier to $188,900 in January.
With today’s report, the NAR issued its annual revisions affecting data over the past three years. Sales totaled 5.09 million in 2013, the same as previously 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 clearly one of the factors. Buyers want to see more choices.”
The existing home-sales decline was led by a 7.3% drop in the West, followed by a 7.1% decrease in the Midwest.
First-time buyers accounted for 26% of all purchases in January, the lowest since record keeping began in October 2008.
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 after a record 7.08 million homes were sold.
Inclement weather in the Eastern U.S. risks further restraining the housing market. Last month was the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Md. The Northeast is also on track for the coldest winter since 1982, measured from December to February, the group said.
Builders have felt the sting of colder conditions. The pace of home construction fell 16% to an 880,000 annualized rate last month, the biggest decrease since February 2011, Commerce Department data showed last week.
Builder confidence also slumped as the weather slowed both potential buyer traffic and sales. The National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month from 56 in January, the biggest decline since monthly record-keeping began in 1985. Readings less than 50 mean more respondents reported poor market conditions than good.
Beyond weather, purchasing a home has become less affordable. The 30-year fixed mortgage rate averaged 4.33 in the week ended Feb. 20, up from 3.56% around the same time a year ago. After reaching a four-month low of 4.1% at the end of October, the average rate rose to 4.53 percent at the start of this year.
“If you recall back a couple quarters ago, there was a pretty adverse reaction to the increase 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 conference call. As spring approaches, rates “will be less and less a factor.”