US home resales fell to an 18 month-low in January as the combination of cold weather and a lack of housing stock sidelined potential buyers. The National Association of Realtors said on Friday home sales dropped 5.1 percent to an annual rate of 4.62 million units, the lowest level since July 2012. December's sales pace was unrevised at 4.87 million.
"Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception," said Lawrence Yun, NAR chief economist. "Some housing activity will be delayed until spring." Economists polled by Reuters had expected sales to fall to a 4.68-million pace last month. Existing home sales are counted at the closing of contracts. January's sales mostly reflected contracts signed in December.
With temperatures remaining chilly in January, February sales will probably be weak. Sales tumbled in the Northeast, South and Midwest, which were hit by snow storms and ice last month. They were down 7.3 percent in the West, an indication that other factors apart from the weather weighed down on sales. Fundamentals in the sector have weakened somewhat. Mortgage rates have risen and the increase in house prices has far outpaced income growth, making home buying less affordable.
In addition, there has been less housing stock on the market and household formation fell sharply in 2013. Home resales have declined in five of the last six months, having peaked in July. Home sales were down 5.1 percent in January from a year-ago. The existing home sales report added to other weak housing data such as housing starts and permits. It was also the latest indication the economy started 2014 on a weak footing.
Weak homes sales weighed on brokers' commissions in the fourth quarter, contributing to a contraction in the residential sector for the first time in nearly three years. 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 to $188,900. Other details of the report were a bit downbeat. First-time buyers accounted for 26 percent of the transactions, the lowest 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.
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