Sales of existing homes fell by 5.10 percent in January according to the National Association of REALTORS.
Pre-owned home sales slowed to a seasonally-adjusted annual rate of 4.62 million homes against an expected reading of 4.65 million and December's reading of 4.87 million existing homes sold.
Rising home prices are reducing the number of affordable homes and a shrinking inventory of available homes were said to be underlying causes to January's slump in existing home sales.
Severe winter weather also contributed to lower sales.
January's reading was the lowest for existing home sales since July of 2012. The national inventory of available pre-owned homes was 1.90 million, which represents a 4.90 month supply at the current sales pace.
Real estate pros look for a 6 to 6.50 month supply of existing homes to balance demand and availability between buyers and homes for sale.
High demand against a low supply of available homes suggests that some home sales weren't completed due to a bottleneck between willing buyers and a low supply of available homes. Rising home prices also limit affordability for first-time and moderate income home buyers.
Regional Sales Of Existing Homes Lower:
Existing home sales fell across all four regions:
- Northeast: -3.10 percent
- Midwest: -7.1 percent
- South: -3.5 percent
- West: 7.3 percent
Slow job growth, new mortgage rules and high loan approval standards were also reported as causes for slower sales. Short supplies of existing homes in high demand locations are causing multiple offers on homes, and in some areas, cash offers are in play. High competition for homes can eliminate home buyers with a limited range of purchasing power.
Reports on new construction and home builder confidence in housing market conditions supported the slower rate of existing home sales in January
Home prices, while still increasing, are not growing at the rapid rates seen in 2013. The national median home price in January rose to $188,900, which represents a 10.70 percent increase year-over-year. Analysts said that existing home sales that weren't completed due to the winter weather can be expected to recover as warmer weather arrives.
Distressed Home Sales Impact Average Home Price:
Distressed sales of existing homes including foreclosed properties and short sales represented 15 percent of January sales of existing homes, down from 24 percent in January 2013, and higher than December's reading of 14 percent.
Sales of foreclosed homes averaged 16 percent below market value and short sales were completed at an average of 13 percent below market value. Discounted home prices impact home prices in areas that have larger numbers of distressed homes for sale.
As warmer weather approaches, new home construction will pick up and more homeowners will be likely to put their homes on the market.