US home sales constrained by tight supply
WASHINGTON: US home resales rebounded modestly in February against the backdrop of a persistent shortage of properties on the market, a trend that could undermine the spring selling season.
Sluggish home sales are another sign that economic activity slowed sharply in the first quarter, which could further diminish expectations that the Federal Reserve will increase interest rates in June.
“Part of the problem is that buyers don’t have a lot of choice. The Fed singled out housing as a sector that remains slow, and it still is, but that doesn’t mean the Fed shouldn’t hike rates,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The National Association of Realtors said on Monday that existing home sales rose 1.2 per cent to an annual rate of 4.88 million units, failing to reverse January’s 4.9 per cent plunge.
Tight inventories are hurting sales by boosting home prices and limiting the selection of houses available to potential buyers.
According to the Realtors group, buyers typically look at between
Part of the problem is that buyers don’t have a lot of choice. The Fed singled out housing as a sector that remains slow, and it still is, but that doesn’t mean the Fed shouldn’t hike rates.
Joel Naroff, chief economist
10 to 15 houses before making a purchase.
Economists had forecast home resale rising to a 4.90 million-unit pace last month.
February’s sluggish sales suggested that broker commissions and residential investment weakened in the first quarter.
Economic growth estimates for the January-March period range from a 1.2 per cent to 2 per cent annual rate.
The economy grew at a 2.2 per cent pace in the fourth quarter.
A tight housing supply means builders will need to ramp up construction.
The US housing sector index on Monday was up marginally, with shares in the largest homebuilder, DR Horton , gaining 0.1 per cent.
Shares of Lennar Corp were up 0.3 per cent, while Pulte Group advanced 0.1 per cent.
The dollar fell against a basket of currencies, and prices for US Treasury debt were marginally lower.
The median price for a previously owned home was 7.5 per cent higher from a year ago.
That was the largest percentage gain since February 2014 and suggested that the pace of home price increases, which had been slowing after double-digit growth for much of 2013, appears to be reaccelerating.
That is helping to sideline firsttime buyers despite a firming labour market and government steps to ease credit conditions.
First-time buyers accounted for 29 per cent of transactions last month, well below the 40 per cent to 45 per cent share that economists and realtors say is required for a strong housing recovery. — Reuters