A host of factors combined in January to make the perfect storm in the housing market, resulting in the lowest level of existing-home sales in a year-and-a-half, according to new data from the National Association of Realtors.
Sales of existing U.S. homes fell 5.1 percent on both a monthly and yearly basis to a seasonally adjusted annual rate of 4.62 million. Sales levels have not been that low since July 2012 when they fell to 4.59 million.
January home prices did a nose-dive as well from December, falling to a median existing-home price of $188,900 down from $197,700. The new price was still up 10.7 percent from January 2012, but that is largely due to the lack of available inventory. There were 1.90 million existing homes for sale at the end of January, up 2.2 percent from December and representing a 4.9-month supply. Even with the small uptick, inventory is still below the 6.0 to 6.5-month supply that is considered to be a balanced market between demand and supply.
Interest rates fell slightly in January, which should have helped push sales upward if not for the other detracting factors. The average rate on a 30-year fixed rate conventional mortgage dropped to 4.43 percent from 4.46 percent in December. A year ago the average rate was just 3.41 percent.
“Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” said NAR chief economist Lawrence Yun in a statement. “Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”