Weather Limits Housing Sales

Don Hogsett, March 14, 2005

New York — Hampered in part by severe winter storms that raged through much of the nation, housing activity was broadly held in check during January, with sales of new and existing homes both slipping, while housing starts continued their recent climb.

Sales of generally lower-priced existing homes, by far the largest segment of the market, declined for a second straight month in January, slipping by 0.1 percent, to 6.8 million units, following a 2.4 percent decline in December. Sales of single-family homes declined even further, but the drop there “was offset by a record monthly level of condo sales, which just came off its ninth consecutive record year,” said David Lereah, chief economist of the National Association of Realtors.

With demand for existing homes still strong, the national median price in January jumped 10.5 percent from year-before levels, to $189,000 from $171,000. Aided by persistently low mortgage interest rates, “The demand for homes remains in record territory, but the supply of homes on the market set an all-time low in January,” said Lereah.

Sales of costlier new homes, hobbled by winter storms, tumbled 9.2 percent in January, to 1.1 million from 1.2 million units, giving up all of the 5.6 percent increase recorded in December. In November, sales of new homes had tumbled by 13.1 percent. Sales are now down slightly more than 15 percent from a 13-month high of 1.3 million units recorded in October. Unusually harsh winter conditions contributed to a 40 percent slide in the Midwest alone. For all of 2005, new home sales are now forecast to drop by 3 to 4 percent as interest rates edge upwards, said David Seiders, chief economist of the National Association of Home Builders.

Extending a recent run-up, housing starts improved for a second straight month, with a 4.7 percent increase building on a strong 14.3 percent gain recorded in December, when the market recovered from a 13.1 percent drop in November.

Housing By Region
Month-To-Month % Change

Existing home sales Housing starts New home sales
Source: U.S. Department of Commerce and National Association of Realtors
Northeast -3.5% -23.9% -17.1%
Midwest -5.2 -12.5 -40.3
South 3.5 18.8 -3.3
West 0.6 1.9 5.6

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