U.S. existing home sales fall in January on decline in single-family units

The existing home sales in the U.S. dropped in the month of January, coming in contrary to consensus expectations. The existing home sales fell 3.2 percent sequentially to 5.38 million, as compared with consensus expectation of reaching 5.60 million. Moreover, the November and December data were downwardly revised, implying weaker momentum in sales heading into the first quarter.

Single-family units mainly drove the drop in January sales, falling 3.8 percent sequentially, while multi-family structures recovered 1.6 percent sequentially after a sharp decline in December. Delving into other details, total months’ supply rose to 3.4, but continues to be close to a historical low. Inventories of existing homes continue to lean at 1.71 million units on a seasonally adjusted basis. The tight inventory situation is putting upward pressure on home prices, with median home price appreciation at 5.8 percent year-on-year.

The retreat in closings in January probably reflects the glaring lack of inventory, along with increased prices, which is increasingly making certain pockets of the market less affordable. On the upside, though, surveys are reporting sound buyers’ traffic, implying solid demand amidst subdued supply conditions.

“With regard to the effect on our Q1 GDP tracking, this morning’s report was weaker than we had expected and implies lower brokers’ commissions in Q1 than we had penciled in. As a result, we revised our residential investment tracking estimate lower. However, after rounding, our Q1 GDP tracker was left unchanged at 2.2 percent”, noted Barclays.

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