(CN) — The National Association of Realtors said Wednesday that sales of existing homes fell in January from a year earlier by the most in more than three years.
According to the Realtors, sales dropped 3.2 percent from December to January, the second straight monthly decline, to a seasonally adjusted annual rate of 5.38 million.
Compared with 12 months earlier, sales dropped 4.8 percent — the steepest year-over-year decline since August 2014.
Lawrence Yun, the association’s chief economist, said “the utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month.”
“While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace,” Yun said. “It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”
The total supply of homes for sale dipped to 1.52 million, the fewest for any January since records began in 1999.
The median existing-home price for all housing types in January was $240,500, up 5.8 percent from the $227,300 median existing-home price in January 2017. January’s price increase marks the 71st straight month of year-over-year gains.
The average 30-year fixed mortgage rate reached 4.38 percent last week, the highest in nearly four years. While that is still a historically low rate, for many homeowners it is much higher than their current mortgage rate.
First-time buyers were 29 percent of sales in January, which is down from 32 percent in December 2017 and 33 percent a year ago.
“Another month of solid price gains underlines this ongoing trend of strong demand and weak supply,” Yun said. “The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability.”
“However, there’s hope that the tide is finally turning,” he added. “There was a nice jump in new home construction in January and homebuilder confidence is high. These two factors will hopefully lay the foundation for the building industry to meaningfully ramp up production as this year progresses.”
Writing for Zillow, the online real estate database, senior economist Aaron Terrazas said some of the lackluster performance of the existing-home sales market in January can be attributed to bad weather early in the month, but added, “a temporary blip that still doesn’t fully obscure what could be more lasting challenges emerging in the market.”
“Mortgage interest rates have been rising strongly since the start of the year,” he said. “While rates are still low compared to historic norms, if the rate increases scared away some would-be buyers by denting affordability, that does not bode well for the rest of the year in which rates are only expected to go up.
Terrazas went on to say that low inventory also continues to weigh on the market, and “shows precious few signs of easing.”