Home Sales in January Fall to 38 Month Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales — FELL 1.2 percent, 60,000, in January to a seasonally adjusted annual sales rate of 4.94 million;
  • Median price of an existing single-family home DROPPED 2.8 percent, $7,200, to $247,500;
  • Year-year the median price is up 2.8 percent or $6,700;
  • Number of homes available for sale ROSE 60,000 or 3.9 percent to 1.59 million;
  • The months’ supply of homes for sale in January edged UP 0.2 months to 3.9 months.

Trends:

  • The pace pf existing home sales has FALLEN in nine of the last 10 months; the last time the sales rate was below 5 million was November 2015
  • Year-year sales were DOWN 8.2 percent, the 11th consecutive month year-year sales have slipped;
  • The median price of an existing single-family home FELL to its lowest level since last February and has fallen for six of the last seven months.
  • Despite a dip in prices – or perhaps because — the number of homes for sale ROSE for the first time since last June

Data Source: National Association of Realtors: (NAR)

Image result for existing home sales

The beleaguered home sales market took another hit in January despite another dip in prices.

Sales of existing single-family homes began to nosedive last April and despite a slight uptick in October have continued to fall.

Just has failures have a lot of fathers, the tumble in home sales can be attributed to several factors not the least of which is the cut in the tax advantages of owning a home which was enacted as part of the December 2017 tax changes. Under that legislation, the deductibility of mortgage interest was capped as was the tax break resulting from local real estate taxes.

At the same time, would-be first-time homebuyers remain burdened by student loan debt. Those potential buyers are in the same age cohort as individuals who came of age during the mortgage meltdown ten years ago who may be gun-shy about buying a home and becoming saddled with a mortgage.

The sales slump continued in January although mortgage rates dipped as the Federal Reserve held off on another increase in the target fed funds rate. According to Freddie Mac, the average rate for a 30-year fixed rate mortgage in January was 4.46 percent, down from 4.64 percent.

The slowdown in sales could have widespread ramifications for the economy as a growing number of empty nesters who were counting on the appreciation of their homes to help fund retirement find themselves unwilling or unable to sell. Others may have bitten the bullet and put their homes up for sale despite the drop in the median price fearing that if they delay prices could go down still further.

And, there could be more bad news on the horizon.

The NAR’s pending home sales index – which tracks contracts for sale – fell in December to 99.0, under 100 for the first time since April 2012. The index typically translates into closed sales one-to-two months later as buyers apply for and obtain a mortgage. The index for October fell 2.6 percentage points leading to a 4.0 percent drop in the pace of December closings. The index for November was off 0.9 percent resulting in the smaller decline in January closings.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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