Sales of previously owned homes slipped in January for the second straight month and they posted their largest yearly decline in than three years.
Existing-home sales, which are completed transactions, slumped 3.2 percent last month to a seasonally adjusted annual rate of 5.38 million from 5.56 million in December, the National Association of Realtors (NAR) said Wednesday.
After last month’s decline, sales are 4.8 percent below where they were a year ago, the largest annual drop since August 2014, and their slowest pace since September.
“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,” said Lawrence Yun, NAR chief economist.
Total housing inventory at the end of January rose 4.1 percent to 1.52 million existing homes available for sale but is still 9.5 percent lower than a year ago. The amount of inventory has fallen year-over-year for 32 consecutive months.
Unsold homes on the market is at a 3.4-month supply at the current sales pace, down from 3.6 months a year ago.
All major regions saw monthly sales decreases last month.
Even amid reports that buyer traffic is picking up, sales still lagged behind last January’s pace.
“It’s very clear that too many markets right now are becoming less affordable and desperately need new listings to calm the speedy price growth,” Yun said.
The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300).
January’s price increase marks the 71st straight month of year-over-year gains.
“Another month of solid price gains underlines this ongoing trend of strong demand and weak supply,” Yun said.
Yun blames the lack of building of single-family homes over the past decade — since the housing crisis hit — as a major reason for the inventory crisis that is weighing on affordability.
The average rate for a 30-year fixed-rate mortgage rose for the fourth straight month to 4.03 percent in January from 3.95 percent in December, according to Freddie Mac. The average rate for last year was 3.99 percent.
“The gradual uptick in wages over the last few months is a promising development for the housing market, but there’s risk these income gains could be offset by the recent jump in mortgage rates,” Yun said.
“If inventory conditions can improve enough to cool the swift price growth in several markets, most prospective buyers should be able to absorb the higher borrowing costs,” he said.
First-time buyers represented 29 percent of sales in January, which is down from 32 percent in December 2017.
All-cash sales were 22 percent of transactions in January, which is up from 20 percent in December.
Distressed sales — foreclosures and short sales — were 5 percent of sales in January, unchanged from December and 7 percent below a year ago.
January existing-home sales fell 1.4 percent in the Northeast, 6 percent in the Midwest, 1.3 percent in the South and 5 percent in the West.