U.S. home sales hit three-year low, price gains slow

WASHINGTON (Reuters) – U.S. home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market. The weak report from the National Association of Realtors (NAR) on Tuesday also suggested the economy was slowing. A month-long partial shutdown of the federal government, which has delayed data from the Commerce Department is, however, making it difficult to get a good read of the economy. “We believe the economic outlook also took a toll on consumers and caused them to pull back from putting down payments on the most expensive purchase they will ever make in their lives,” said Chris Rupkey, chief economist at MUFG in New York. The NAR said existing home sales declined 6.4 percent to a seasonally adjusted annual rate of 4.99 million units last month. That was the lowest level since November 2015. November’s sales pace was revised slightly up to 5.33 million unit from the previously reported 5.32 million units. Economists polled by Reuters had forecast existing home sales falling 1.0 percent to a rate of 5.25 million units in December. Existing home sales, which make up about 90 percent of U.S. home sales, plunged 10.3 percent from a year ago. For all of 2018, sales fell 3.1 percent to 5.34 million units, the weakest since 2015. The housing market has been stymied by higher mortgage rates as well as land and labor shortages, which have led to tight inventory and more expensive homes. But there are glimmers of hope for the sector. The 30-year fixed mortgage rate has dropped to a four-month low, with much of the moderation occurring in the second half of December, and house price inflation is slowing. The median existing house price increased 2.9 percent from a year ago to $253,600 in December. That was the smallest increase since February 2012. A survey last week showed a rebound in homebuilders confidence in January amid optimism over market conditions now and over the next six months, as well buyer traffic. Stocks on Wall Street were trading lower amid fears of slowing global economic growth after the International Monetary Fund trimmed its outlook. The dollar was little changed against a basket of currencies and U.S. Treasury prices rose. BROAD WEAKNESS Homebuilders are hopeful that the moderation in mortgage rates “will help the housing market continue to grow at a modest clip as we enter the new year.” The shutdown started on Dec. 22 as President Donald Trump demanded that Congress give him $5.7 billion this year to help build a wall on the country’s border with Mexico. It has affected the Commerce Department, leading to the suspension of the publication of data compiled by its Bureau of Economic Analysis and Census Bureau, including new home sales, housing starts and building permits. Data released before the shutdown had pointed to persistent weakness in the housing market, with economists estimating that housing would be again a drag on gross domestic product in the fourth quarter. Residential construction has subtracted from GDP growth since the first quarter of 2018. Economists estimate that the impasse over the border wall was cutting off at least two-tenths of a percentage point from quarterly GDP growth a week. The Realtors group said the longest government shutdown in the history of the United States had so far not had an impact on home sales, but warned this could change. Last month, existing home sales fell in all four regions. There were 1.55 million previously owned homes on the market in December, down from 1.74 million in November, but up from 1.46 million a year ago. At December’s sales pace, it would take 3.7 months to exhaust the current inventory, down from 3.9 in November and up from 3.2 a year ago. A six-to-seven-months supply is viewed as a healthy balance between supply and demand. Houses for sale typically stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. Thirty-nine percent of homes sold in December were on the market for less than a month. The share of first-time buyers fell to 32 percent last month from 33 percent in November. Economists and realtors say a 40 percent share of first-time buyers is needed for a robust housing market. Sales fell in all price segments of the market last month, with steep declines at the lower end, which accounts for a large portion of the housing market.

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