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Economic Watch: Existing Home Sales Fall, Total Construction Rises

February 23, 2015

By Evan Lockridge

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Photo: Evan Lockridge
Photo: Evan Lockridge

Existing-home sales in the U.S. declined in January to their lowest rate in nine months, but the pace was higher than a year ago for the fourth straight month, according to new figures from the National Association of Realtors.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 4.9% to a seasonally adjusted annual rate of 4.82 million in January from an upwardly-revised 5.07 million in December. Despite January’s decline, sales are higher by 3.2% than compared to a year ago.

Lawrence Yun, NAR chief economist, says the housing market got off to a somewhat disappointing start to begin the year with January closings down throughout the country.

“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” he said. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

According to Yun, although sales cooled in January, home prices continued solid year-over-year growth.

“The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand,” he said. “The big test for housing will be the impact on affordability once [interest] rates rise.”

All major regions experienced declines in January, with the Northeast and West seeing the largest.  

Meantime, a separate report shows the value of all new U.S. construction starts climbed 9% in January to a seasonally adjusted annual rate of $621 billion, according to Dodge Data & Analytics, a provider of construction industry data.

The increase for total construction was the result of an especially strong performance by the nonbuilding construction sector, while nonresidential building lost momentum for the second month in a row and residential building pulled back due to a slower pace for multifamily housing.

On an unadjusted basis, total construction starts in January were reported at $43.2 billion, up 18% from the same month a year ago.

The January statistics raised the Dodge Index to 131 compared to 120 for December although still short of the most recent high of 143 reached in November. For all of 2014 the Dodge Index averaged 122.

“During 2014 and now early 2015, the month-to-month pattern for construction starts has often reflected the presence or absence of exceptionally large projects,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “The month-to-month variation for overall construction starts is taking place around what is still a rising trend. For nonresidential building, the continued improvement by its commercial and now its institutional project types should enable this sector to register more growth in 2015, notwithstanding a sluggish January. For residential building, the strengthening job market and some easing of lending standards for home mortgages are expected to help single family housing see moderate improvement relative to a flat 2014.”

The 18% gain for total construction starts on an unadjusted basis for January 2015 compared to January 2014 was the result of this performance by sector with nonresidential building, down 10%; residential building, down 3%; and nonbuilding construction, up 85%.

By geography, total construction starts for January 2015 relative to January 2014 showed an increase for one region, the South Central, up 83%. The other four major regions witnessed decreased activity compared to the same month a year ago with the South Atlantic, down 1%; the West, down 3%; the Northeast, down 7%; and the Midwest, down 11%.

 

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