U.S. New Home Sales Fall, Weather Blamed
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New home sales fell slightly in January, which economists are blaming on cold weather in the Northeast.
Approximately 481,000 new single-family home sales occurred in January on a seasonally adjusted annualized rate, according to a new report released by the Commerce Department. While the department revised upwards its previous estimate for December sales, a slowdown in January came despite falling interest rates and relative warmth in some parts of the country.
New home sales fell slightly in January, which economists are blaming on cold weather in the Northeast.
Approximately 481,000 new single-family home sales occurred in January on a seasonally adjusted annualized rate, according to a new report released by the Commerce Department. While the department revised upwards its previous estimate for December sales, a slowdown in January came despite falling interest rates and relative warmth in some parts of the country.
New home sales in January rose by 5.3% on a year-over-year basis, but analysts were expecting a higher growth rate, as mortgage interest rates are significantly lower than they were a year ago and weather in January was much better than a year ago. In 2014, the United States posted a steep decline in GDP, with growth falling by 2.9% on the weather.
Regional Variations
Sales trends varied between regions, with the Northwest seeing the largest decline in sales and the Midwest seeing the largest gains.
In the Northeast, which has suffered the coldest weather in the country in January, sales fell 50% on a year-over-year basis and by 51.6% on a month-over-month basis.
However, the relatively warm western region saw a month-over-month fall in home sales, declining 0.8% month-over-month in January. The also warmer southern region saw mediocre growth, with new home sales rising 2.2% on a month-over-month basis.
The largest gains in home sales were in the Midwest, where home sales rose 21.6% on a year-over-year and 19.2% month-over-month. The Midwest is also the most affordable region, according to the National Association of Home Builders. In a recent report, the NAHB noted that home prices were growing at a lower rate in the Midwest than in other parts of the country, which was keeping them more available for middle-class Americans.
In recent years, falling interest rates supported strong price gains in real estate nationwide, as monthly payments for more expensive homes remained the same as payments for less expensive homes when rates were higher.
Purchasing Activity Rises
While January was a slow real estate market, a separate report from the Mortgage Bankers Association may indicate that the market will reverse course in the near future.
The MBA’s weekly Mortgage Applications Survey saw a 5% increase in its purchasing index from the prior week, leading a four-week moving average of the index to its highest point since the beginning of 2014. The purchasing index is a leading indicator of home sales, and may be benefitting from low interest rates.
However, some economists believe stagnant wages and five years of home price growth are pinching the market, and could constrain buyers from flooding the market, especially in high-priced regions such as the West and Northeast, where new home sales were the most sluggish in January.
