Wrapup 1: U.S. home sales post 12th straight monthly decline; house price inflation cools

Applied Energetics

21/02/2023 16:47

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      Existing home sales fall 0.7% in January
    

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      Median house price rises 1.3% to $359,000 from year ago
    

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      Supply increases 15.3% year-on-year to 980,000 units
    

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      Business activity rebounds in February
    

  
       WASHINGTON, Feb 21 (Reuters) - U.S. existing home sales
dropped to the lowest level in more than 12 years in January,
but the pace of decline slowed, raising cautious optimism that
the housing market slump could be close to reaching a bottom.
    The report from the National Association of Realtors on
Tuesday also showed the smallest increase in annual house prices
since 2012, which should help to improve affordability. It will,
however, be a while before the housing market turns the corner.
    Mortgage rates have resumed their upward trend after robust
retail sales and labor market data as well as strong monthly
inflation readings raised the prospect of the Federal Reserve
maintaining its interest rate hiking campaign through summer. 
    Existing home sales fell 0.7% to a seasonally adjusted
annual rate of 4.00 million units last month, the lowest level
since October 2010, when the nation was grappling with the
foreclosure crisis. That marked the 12th straight monthly
decline in sales, the longest such stretch since 1999.
    Sales fell in the Northeast and Midwest, but rose in the
South and West. Economists polled by Reuters had forecast home
sales rising to a rate of 4.10 million units. Home resales,
which account for the biggest share of U.S. housing sales,
plunged 36.9% on a year-on-year basis in January.
    The housing market has been the biggest casualty of the
Fed's aggressive monetary policy tightening. Residential
investment has contracted for seven straight quarters, the
longest such stretch since 2009. 
    Government data last week showed single-family homebuilding
and permits for future home construction declining in January. 
    The 30-year fixed mortgage rate rose to an average 6.32%
last week from 6.12% the prior week, according to data from
mortgage finance agency Freddie Mac. The second straight weekly
increase reflected a spike in U.S. Treasury yields.
    U.S. stocks were trading lower. The dollar was steady
against a basket of currencies. U.S. Treasury prices fell.
    HOPEFUL SIGNS
    But there are some rays of hope. Homebuilders confidence
rose to a five-month high in February, though morale remains
depressed. The median existing house price increased 1.3% from a
year earlier to $359,000 in January as homeowners whose
properties have been on the market for a while lowered asking
prices. That was the smallest annual gain since February 2012. 
    Properties typically remained on the market for 33 days last
month, up from 26 days in December. 
    "Buyers are beginning to have better negotiating power,"
said NAR chief economist Lawrence Yun. "Homes sitting on the
market for more than 60 days can be purchased for around 10%
less than the original list price."
    There were 980,000 previously owned homes on the market, up
2.1% from December and 15.3% from a year ago. But this mostly
reflected homes staying on the market longer than in prior
months. New listings remained low.
    At January's sales pace, it would take 2.9 months to exhaust
the current inventory of existing homes up from 1.6 months a
year ago. A four-to-seven-month supply is viewed as a healthy
balance between supply and demand.
    Fifty-four percent of homes sold in January were on the
market for less than a month. First-time buyers accounted for
31% of sales, up from 27% a year ago. All-cash sales made up 29%
of transactions compared to 27% a year ago.
    While the housing market is still searching for a floor,
business activity rebounded in February, reaching its highest
level in eight months, according to a survey on Tuesday. 
    S&P Global said its flash U.S. Composite PMI Output Index,
which tracks the manufacturing and services sectors, increased
to 50.2 this month from a final reading of 46.8 in January. 
    That ended seven straight months of the index running below
the 50 mark, which indicates contraction in the private sector.
The services sector accounted for the rise in business activity,
while manufacturing remained weak. Economists polled by Reuters
had forecast the index at 47.5.
    The rebound in business activity fits in with recent robust 
retail sales, the labor market and manufacturing production
data, which have suggested solid momentum in the economy at the
start of the year. 
    "The economy is finding its balance," said Jeffrey Roach,
chief economist at LPL Financial in Charlotte, North Carolina.
 (Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu
Nomiyama)
 ((Lucia.Mutikani@thomsonreuters.com))