According to Reuters, US home sales dropped to the lowest level in about twelve years in January. But, the decline slowed. This has raised cautious optimism that the housing market slump can be nearing a bottom.
The National Association of Realtors put up a report on Tuesday that showed a little increase in the annual house costs since 2012. This shall help to improve affordability. However, it will take a little time before the housing market turns around.
At present, mortgage rates have resumed an upward trend. This is after the robust retail sale and labor market data. Also, monthly solid inflation readings have raised the prospect of the Federal Reserve maintaining the interest rate upsurge campaign in the summer.
A property economist at Capital Economics, Sam Hall, said that the decline in home sales in January supports their view that the housing market is reaching a trough. But, the increasing economic headwinds and hard affordability mean sales shall recover gradually and slowly this year.
The existing home sales were down 0.7 percent to an adjusted yearly rate of 4.00 million units last month. This is the lowest level since October 2010. Sales also were down in the Midwest and Northeast because of harsh weather, but the sales rose in the West and South.
Economic analysis
Economists who Reuters polled forecasted home sales to rise to the rate of 4.10 million units. Home resales went down 36.9 percent on a year-on-year in January. This was the most significant slump in the housing market caused due to the aggressive monetary policy tightening by the Fed. Residential investment contracted for seven quarters. Government data in the last week show single-family home-building and permits for home construction in the future declining in January.
The thirty-year fixed mortgage rate averaged 6.32 percent last week from 6.12 percent in the prior week. This data is according to the mortgage finance agency Freddie Mac. The 2nd straight weekly increase has reflected a rise in USA Treasury yields. Stocks on Wall Street were then trading lower.
Final analysis of the economic whereabouts
Homebuilders’ confidence went up to a 5-month high in February. The existing house costs increased 1.3 percent from one year earlier to $ 359,000 in January. The homeowners whose properties have been on the market for a while now lowered asking prices. Properties remained on the market for thirty-three days in the last month. This was up from twenty-six days in December.
Previously, there were 980,000 owned homes on the market front. This was up 2.1 percent from December and 15.3 percent one year ago. But this reflected homes staying on the market longer than in previous months. And the new listings now remained low.
In January, the sales pace shows that it can take 2.9 months to exhaust the current inventory of existing homes, up from 1.6 months one year ago. A 4-to-7-month supply is also considered a good balance between demand and supply.
54 percent of homes sold in January were on the market for less than one month. 1st-time buyers accounted for 31 percent of sales. It was up from 27 percent one year ago. All-cash sales totaled up 29 percent of transactions compared to 27 percent one year ago.
The rebound in the business activity fits in with the most recent robust retail sales. The labor market and the manufacturing production data have suggested good momentum in the US economy at the beginning of the year.