Harsh weather, tight supply sink U.S. home sales

Fri Feb 21, 2014 2:40pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - Severe cold weather and a shortage of houses on the market pushed U.S. home resales to an 18-month low in January, the latest indication economic activity has hit a soft patch.

The National Association of Realtors said on Friday that home sales dropped 5.1 percent last month to an annual rate of 4.62 million units, the lowest level since July 2012.

The Realtors group said unseasonably cold weather was partly to blame, but it also acknowledged some fundamental weakness, with fewer homes on the market to choose from and higher mortgage rates and prices reducing affordability.

"Some housing activity will be delayed until spring," said Lawrence Yun, NAR chief economist. "At the same time, we cannot ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates."

The 30-year fixed mortgage rate is about a full percentage point higher than it was a year ago, even though rates have come down a bit since hitting a two-year high in September.

Sales tumbled in the Northeast, South and Midwest, which were hit by snow storms and ice last month. But they were down 7.3 percent in the West, an indication that other factors apart from the weather also weighed on sales.

Home resales, which peaked in July, have declined in five of the last six months, and in January were down 5.1 percent from a year-ago.

Economists had expected sales to fall to a 4.68-million pace last month and some were not convinced that the weather had played a major role in the January slump.   Continued...

An existing home for sale is seen in Silver Spring, Maryland February 21, 2014. REUTERS/Gary Cameron