2018.02.2200:44:00UTC+00U.S. Home Sales Dropped in January

U.S. home sales suddenly dropped in January, leading to the biggest year-on-year decline in more than three years, as a chronic shortage of houses raised prices and kept first-time buyers out of the market.

Existing home sales fell 3.2 percent to a seasonally adjusted annual rate of 5.38 million units in January, with purchases dropping in all four regions.

The supply squeeze and rising mortgage interest rates are fuelling fears of a weak spring selling season. The second consecutive monthly decline in home sales reported by National Association of Realtors added to weak retail sales and industrial production in January in suggesting slower economic growth in the first quarter.

Existing home sales, which account for about 90 percent of U.S. home sales, fell 4.8 percent on a year-on-year basis in January. That was the biggest year-on-year drop since August 2014. The weakness in home sales is largely a function of supply constraints rather than a lack of demand, which is being driven by a strong labor market.

The shortage of properties is concentrated at the lower end of the market. While the number of previously-owned homes on the market increased 4.1 percent to 1.52 million units in January, housing inventory fell 9.5 percent from the previous year

That was also the lowest inventory for January on record. Supply has declined for 32 straight months on a year-on-year basis. At January's sales pace, it would take 3.4 months to exhaust the current inventory, up from 3.2 months in December.

The U.S. economy expanded at a 2.6 percent annualized rate in the fourth quarter. Making housing expensive for some first-time home buyers, the 30-year fixed mortgage rate rose to an average of 4.38 percent last week, the highest level since April 2014, according to data from mortgage finance agency Freddie Mac.