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US home price rise slows sharply in December
US home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market.
The weak report from the National Association of Realtors (NAR) on Tuesday was the latest indication of slowing economic growth.
A survey last Friday showed that consumer sentiment dropped in January to its lowest level since US President Donald Trump was elected more than two years ago.
Existing home sales were now the weakest since Mr Trump was elected, said MUFG chief economist Chris Rupkey, "signalling the initial confidence boost from the new ideas and new legislation is falling flat".
The NAR said that existing home sales declined 6.4 per cent to a seasonally adjusted annual rate of 4.99 million units last month. That was the lowest level since November 2015.
Economists polled by Reuters had forecast existing home sales falling one per cent to a rate of 5.25 million units in December. Existing home sales, which make up about 90 per cent of US home sales, plunged 10.3 per cent from a year ago. For all of 2018, sales fell 3.1 per cent to 5.34 million units, the weakest since 2015.
The housing market has been stymied by higher mortgage rates as well as land and labour shortages, which have led to tight inventory and more expensive homes.
But there are glimmers of hope. The 30-year fixed mortgage rate has dropped to a four-month low, with much of the moderation occurring in the second half of December, and house price inflation is slowing.
The median existing house price increased 2.9 per cent from a year ago to US$253,600 in December. That was the smallest increase since February 2012.
Wage growth topped 3.2 per cent in December, outpacing house price gains for the first time since February 2012, according to the NAR.
While economists expect affordability to improve, they also caution that changes to the tax code in December 2017, which limited deductions for mortgage interest and property taxes, had reduced the appeal of homeownership.
Stocks on Wall Street were trading lower amid fears of slowing global economic growth after the International Monetary Fund trimmed its outlook. The US dollar was little changed against a basket of currencies and US Treasury prices rose.
A survey last week showed a rebound in homebuilders' confidence in January amid hope that the moderation in mortgage rates "will help the housing market continue to grow at a modest clip as we enter the new year".
A month-long partial shutdown of the federal government, which has delayed data from the Commerce Department is, however, obscuring the economic picture.
The shutdown started on Dec 22 as Mr Trump demanded that Congress give him US$5.7 billion this year to help build a wall on the country's border with Mexico.
It has affected the Commerce Department, leading to the suspension of the publication of data compiled by its Bureau of Economic Analysis and Census Bureau, including new home sales, housing starts and building permits.
Data released before the shutdown had pointed to persistent weakness in the housing market, with economists estimating that housing would again be a drag on gross domestic product (GDP) in the fourth quarter. Residential construction has subtracted from GDP growth since the first quarter of 2018.
Economists estimate that the impasse over the border wall was cutting off at least two-tenths of a percentage point from quarterly GDP growth a week.
The NAR said that the longest government shutdown in the country's history had so far not had an impact on home sales, but warned that this could change.
Last month, existing home sales fell in all four regions. There were 1.55 million previously owned homes on the market in December, down from 1.74 million in November, but up from 1.46 million a year ago.
At December's sales pace, it would take 3.7 months to exhaust the current inventory, down from 3.9 in November and up from 3.2 a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Houses for sale typically stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. Some 39 per cent of homes sold in December were on the market for less than a month.
The share of first-time buyers fell to 32 per cent last month from 33 per cent in November. Economists and realtors said that a 40 per cent share of first-time buyers is needed for a robust housing market. REUTERS