By Konrad Putzier and Will Parker
U.S. home sales sputtered in January, the latest sign that some of the lowest interest rates in half a century are failing to offset the high prices and limited inventory keeping many buyers on the sidelines.
Existing home sales fell 1.3% in January compared with December at a seasonally adjusted annual rate of 5.46 million, the National Association of Realtors said Friday.
That compared with economists’ expectations for a 2% decline last month.
Existing-home sales were up 9.6% in January from a year earlier.
Despite rising incomes and low mortgage rates, many buyers are still struggling to find a home for sale after a decade of little new construction. NAR said the housing inventory level was the lowest for January since 1999.
“We’re stuck in this situation that will take us a few years to dig out of,” said Robert Frick, corporate economist at the Navy Federal Credit Union. While a rise in new construction and year-over-year sales is encouraging, he said, it will take a while for supply to catch up with demand.
A strong job market and low interest rates aren’t providing the impetus for home buying that many economists have expected. The U.S. unemployment rate was 3.6% in January, close to a 50-year low. The average interest rate on a 30-year xed mortgage was 3.62% in January, according to Freddie Mac, well below the 4.46% in January last year.
Now, some worry that sluggish home-sales activity and fewer people moving could become more of a drag on economic growth.
“If you can’t move to a better job, that means there is less money going into the economy,” Mr. Frick said.
There was a 3.1-month supply of homes on the market at the end of January compared with 3.8 at the same time in the previous year. Limited housing stock has contributed to higher home prices, with the median sales price for an existing home in January up 6.8% from the prior year at $266,300.
Inventory has been tight at the cheaper end of the market. Homes priced from $100,000 to $250,000 experienced a 10.3% drop in inventory from a year earlier in January. Meanwhile, homes in the $250,000 to $500,000 range saw inventory fall 6%.
Amy Pearl, 54 years old, and her 19-year-old college student daughter, Grace, were looking for a condominium in the Buffalo, N.Y., area earlier this month. When they found an apartment they liked, in the suburb of Williamsville, it was immediately off the market.
“It was Super Bowl Sunday, so we were like ‘who’s going to buy a house on Super Bowl Sunday?’ But by Monday it was gone,” Ms. Pearl said.
A few days later, they put in an offer for a two-bedroom unit in the same complex for $94,000, and her daughter is now in contract to buy it. Ms. Pearl said her daughter will live in the apartment with a roommate, a cheaper option than renting.
“We never thought we’d move so quickly,” Ms. Pearl said. “Things are just turning really fast. You just have to be ahead of the game.”
Recently, some signs have emerged that more inventory could be on the way. Residential permits, often a bellwether for future home construction, rose 9.2% in January from the previous month, the Commerce Department said Wednesday, hitting a 13-year high.
A measure of U.S. home-builder confidence remains near a two-decade high, the National Association of Home Builders said Tuesday, despite easing for the second-straight month in February.
While a lack of inventory is hurting sales across much of the country, the situation is different in the South, Mr. Frick said. There, ample supply of building lots and fewer restrictions on new construction have led to more development, allowing more people to move and freeing up existing homes.
Existing-home sales in the South increased 0.4% last month and were up 11.7% compared with a year earlier, according to NAR.
Felicia Elkins was struggling to find a home in Oak Island, N.C., so she started looking at new homes further out of town. She recently bought a four-bedroom, two-story house in a newly built subdivision for $230,000. “We could have continued to rent, but that’s just like throwing money away,” she said.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.
–Harriet Torry contributed to this article.
Write to Konrad Putzier at [email protected] and Will Parker at [email protected]
