A confluence of factors are said to be part of Friday’s disappointing existing-home sales report, which showed sales at an 18-month low. And while much of the country was buried under a blanket of snow for most of January, weather, it seems, accounts for only a small fraction of the chill — and a Spring thaw is not certain.
“It is not a positive trend,” says economist Lawrence Yun of the National Association of Realtors (NAR), which releases the report. “There is credit difficulty, affordability difficulty and a lack of inventory. Weather plays a part in it, but is probably only one third or less.”
The report showed sales dropped 5.1% to a seasonally-adjusted annual rate of 4.62 million homes in January from 4.87 million in December, and are also 5.1% below the unit pace in January 2013. Overall, sales fell to their lowest rate since July of 2012.
In addition, housing starts plunged 16% to a seasonally adjusted annual rate of 880,000 units in January, the lowest level since September, a report from the Commerce Department showed on Wednesday.
“We need more construction,” says Yun, who explained that while this part of the sector has unquestionably been affected by weather, the drop is also because builders cannot easily get construction loans. “Let’s hope that this decline is a one-month phenomenon because there is a strong market incentive for the builders and the lenders to get the deals done and build more homes because of the lack of inventory on the market.”
All the while, home prices continue to rise.
In January, the median existing-home prices for all housing types was $188,900, jumping 10.7% from January 2013.
“While higher valuations are good for the overall market, it hurts affordability,” Jason Meister, vice president of real estate firm Avison Young, told FOX Business. “It’s not the weather. California has actually seen a 15-degree increase and their housing starts are also down….We are having a prolonged recovery and we’re still not out of the woods yet. Our housing market is on life support and as the plug gets pulled as the Fed tapers [its bond-buying program], interest rates are going to rise even higher.”
Jed Kolko, chief economist at Trulia, says that young-adult buyers are still not back at normal levels and that it’s the repeat buyer who will make up more of the housing market in 2014.
“Since the rise in prices are making homes worth more than they were,” he says, “that means [repeat buyers] are discouraged less than the first-time buyers and investors looking for a deal.”