Sales of existing 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 percent from the December pace. The sales rate declined 5.1 percent over the previous 12 months.
In Chattanooga, Realtor-assisted sales were down 7.9 percent in January from a year ago.The Greater Chattanooga Association of Realtors reported that area Realtors sold 429 homes in January at a median price of $138,500. Although sales were down, home prices were up 6.5 percent from a year ago.
The number of new listings locally also fell by 3 percent to 931 homes and the total inventory of residential units on the market dropped by 4.8 percent to 4,624 units.
Vicki Trapp, president of the Chattanooga Realtors group, said snow and cold weather during the month may have depressed sales. She said the outlook for the rest of the first quarter is mixed.
"While most business owners are preparing their year-end taxes throughout the first quarter, they'll also continue to keep a close eye on where the nation's economy stands," Trapp said.
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 percent 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.
The median price nationwide has risen 10.7 percent 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 percent of sales last month were by first-time buyers. In a healthy market, that figure is closer to 40 percent. All cash-sales accounted for 33 percent 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 percent this week from 4.28 percent the previous week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 percent. The increase began after the Federal Reserve signaled 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.
Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...