The National Association of Realtors reported this morning that existing (used) home sales sold at their lowest rate since July 2012, at an annual rate of 4.62 million.
That represents a substantial 5.1% drop from the 4.87 million annual rate witnessed in December. And while economists expected a fall in sales in January, this drop was steeper than the 4.68 million rate projected by economists polled by Reuters.
Causes for the drop in sales likely include low inventory, higher prices, rising interest rates and unusually brutal winter weather in much of the U.S. Inventory in January sat at 1.9 million homes, a 4.9 month inventory at the current sales rate.
The median sales price for existing homes in January was $188,900, up 10.7% year over year, during a time when average incomes have not grown much. Meanwhile, interest rates have also substantially risen in the last year: according to Freddie Mac, the average interest rate in January 2014 was 4.43%, up an entire percentage point since January 2013 (3.41%). The combination of higher prices and higher interest rates, with only marginally higher incomes, means home affordability has fallen steeply, as the average mortgage payment on a newly-purchased home is a whole lot more expensive today than it was a year ago.
Analysts will be watching closely to see what happens as 2014 enters the spring real estate sales season, a traditionally strong time of the year for real estate sales.
Read the full story and the NAR January existing homes sales report here.