"The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the USA last month", said Lawrence Yun, NAR chief economist.
The National Association of Realtors® (NAR) said existing homes sold during the month at a seasonally adjusted rate of 5.38 million, representing a year-over-year decline of 4.8 percent.
Lawrence Yun, the association's chief economist, said "the utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the USA last month".
Economists had forecast existing home sales rising 0.9% to a rate of 5.60 million units in January. It was the slowest sales pace since last September and the largest annual loss since a 5.5 percent decline in August 2014.
The weakness in home sales largely reflects supply constraints rather than a lack of demand. In contrast, wage growth remains stuck below 3 percent on an annual basis despite the unemployment rate being at a 17-year low of 4.1 percent. Total housing inventory declined in January from a year earlier to 1.52 million existing homes for sale, the lowest January count since 1999 when the agency began tracking the data.
The low inventory levels are a legacy of a decade of boom and bust in USA housing.
If the current pace of sales continues - which NAR doesn't anticipate - purchases would be lower than in 2017.
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A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
January's price increase marks the 71st straight month of year-over-year gains.
The average rate for a 30-year fixed-rate mortgage rose for the fourth straight month to 4.03 percent in January from 3.95 percent in December, according to Freddie Mac. "So with more savings needed and payments increasing many home shoppers may be back on the fence until we see one of these trends turn around".
The tax-code overhaul passed in December, among other things, limited deductibility of very large mortgages as well as state and local taxes, including property-tax bills. Economists and realtors say a 40 percent share of first-time buyers is needed for a robust housing market. The months sales results were broad-based.
The decline was driven by drops in single-family home sales in the West and Midwest.
In January, houses typically stayed on the market for 42 days, up from 40 days in December and down from 50 days a year ago. However, December inventory was revised downward by about 2,000 units to 1.68 million units (SAAR), and that revision accounts for about 5 percent of the month-over-month increase in on-market inventory.
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