US existing home sales have hit a 3-year low, dropping -1.2% in January after dropping 6.4% the month before with prices rising only modestly. The data shows home sales to be well below market expectations of a 0.2% increase.
- US home sales fell last month to the lowest level since November 2015, well below analysts expectations of 5 million units sold.
- The National Association of Realtors stated that sales dropped 1.2%.
- The report suggests further weakness in the already-struggling housing market.
December sales were revised slightly upward, but January sales have unexpectedly hit a 3-year low, another concerning indicator of the ongoing slowdown in the housing market. The drop in January follows months of weakness, with last month also posting a major 6.4% drop and existing home sales now down 8.5% from the same period last year despite a recent relief in mortgage rates.
The sharp rise in mortgage rates over the last two years has been cited as the leading cause of the slowdown in sales as well as land and labor shortages, all of which has resulted in tight inventory and unaffordable prices for some buyers.
While the 30-year fixed mortgage rate has dipped to 4.5% over the last few months along with housing price inflation, seemingly it’s not enough to encourage would-be buyers to make a purchase. The average house price rose 2.8% from last year to $247,500 in January, the smallest increase since February 2012.
However, home sales fell last month in three out of four major regions with only the Northeast seeing increased sales in January which saw 1.59 million homes for sale on the market compared to 1.53 million in December.
With the most recent rate of sales, it would take 3.9 months to clear the current inventory compared to 3.7 months in December – a supply between six to seven months is considered to be healthy.
— NAR Research (@NAR_Research) February 21, 2019
NAR chief economist Larry Yun was optimistic and stated that he does not expect the numbers to undergo continued decline, saying that the figures do not tell the full story.
"Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months. Lower mortgage rates from December 2018 had little impact on January sales, however, the lower rates will inevitably lead to more home sales.”
Gold has ticked upward slightly following the extremely negative home sales report but is still trading down -0.77% after reaching a 10-month high earlier in the week. Spot gold last traded at $1,333.01/oz with a high of $1,345.28/oz and a low of $1,332.72/oz. The decline may be the result of somewhat positive labor market data but is also within the normal range of corrective pullback following the type of strong gains seen over the last week.