US home sales fall as record-low inventory boosts prices

WASHINGTON: US home sales fell more than expected in December as the supply of houses on the market dropped to a record low, pushing up prices and sidelining some potential first-time buyers.
The decline in home sales reported by the National Association of Realtors on Wednesday followed three straight months of strong increases. Inventory constraints dogged the housing market last year against the backdrop of robust demand, largely driven by a labour market that is near full employment.
Economists expected supply to remain tight this year, which together with rising mortgage rates could result in modest home sales growth in 2018.
“We expect little growth in sales in 2018, given tight inventories,” said Gregory Daco, chief US economist at Oxford Economics in New York. “Affordability will be crimped by rising mortgage rates, posing an additional headwind to sales.” Existing home sales declined 3.6 per cent to a seasonally adjusted annual rate of 5.57 million units last month amid decreases in all four regions. Unseasonably cold weather probably accounted for some of the weakness as sales in the Northeast and Midwest fell sharply.
November’s sales pace was revised down to 5.78 million units, still the highest level since February 2007. Economists polled by Reuters had forecast home sales falling 2.2 per cent to a 5.70 million-unit rate in December from a previously reported 5.81 million-unit pace in November.
Existing home sales, which account for about 90 per cent of US home sales, rose 1.1 per cent on a year-on-year basis in December. They increased 1.1 per cent to 5.51 million units in 2017, the most since 2006.
The number of previously owned homes on the market tumbled 11.4 per cent to 1.48 million units in December, the lowest since January 1999 when the Realtors group started tracking the series. Supply has been tight at the lower end of the market.
Housing inventory was down 10.3 per cent from a year ago. It has declined for 31 straight months on a year-on-year basis. At December’s sales pace, it would take a record-low 3.2 months to exhaust the current inventory, down from 3.5 months in November.
A six-month supply is viewed as a healthy balance between supply and demand. Supply could improve in the coming months as data last week showed permits approved for the construction of single-family homes increased in December to their highest level since August 2007, while the number of such dwellings under construction was the most in 9½ years.— Reuters