WASHINGTON: US home sales fell for a second straight month in April, weighed down by a chronic shortage of more affordable houses, the latest sign the economy was slowing after a temporary boost from exports and an inventory overhang in the first quarter.
The unexpected drop in sales reported by the National Association of Realtors on Tuesday came on the heels of data last week showing retail sales and industrial production dropped in April, which prompted economists to cut growth forecasts for the second quarter.
Falling mortgage rates and the lowest unemployment rate in nearly 50 years are boosting demand for lower-priced homes.
“A mismatch between strengthening entry level demand and scarce entry level supply is likely playing a role in the underwhelming sales pace,” said Charlie Dougherty, an economist at Wells Fargo Securities in Charlotte, North Carolina.
“A significant breakout in existing home sales is unlikely this year.”
Existing home sales fell 0.4 per cent to a seasonally adjusted annual rate of 5.19 million units last month. March’s sales pace was unrevised at 5.21 million units. Economists polled by Reuters had forecast existing home sales rising 2.7 per cent to a rate of 5.35 million units in April.
Existing home sales, which make up about 90 per cent of US home sales, dropped 4.4 per cent from a year ago, the 14th straight annual decrease. According to the NAR, there was a 10 per cent drop from a year earlier in sales of houses priced $100,000 and below.
The Realtors group said there was strong demand in this market segment, but not enough homes for sale. The inventory of housing in this price bracket dropped 17.3 per cent from a year ago.
The NAR also said last year’s revamp of the US tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was crimping demand for homes priced $1 million and above. There has been a marked drop in sales in high tax states such as New Jersey and Connecticut.
The tight housing supply, especially in the lower end of the market is likely because of land and labour shortages.
A survey last week also showed that while single-family home builders were the most optimistic in seven months in May, they complained that they “continue to deal with ongoing labour and lot shortages and rising material costs that are holding back supply and harming affordability.” — Reuters
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