By Lucia Mutikani
WASHINGTON (Reuters) – U.S. home sales fell for a second straight month in April amid weakness in the lower-priced segment of the market, which is suffering from an acute shortage of properties.
The report from the National Association of Realtors on Tuesday added to weak retail sales and industrial production data in suggesting the economy was losing momentum after getting a temporary boost from exports and an accumulation of inventory in the first quarter.
Existing home sales fell 0.4% to a seasonally adjusted annual rate of 5.19 million units last month. March’s sales pace was unrevised at 5.21 million units. Economists polled by Reuters had forecast existing home sales rising 2.7% to a rate of 5.35 million units in April.
Existing home sales, which make up about 90% of U.S. home sales, dropped 4.4% from a year ago. That was the 14th straight year-on-year decrease in home sales.
According to the NAR, there was a 10% drop from a year earlier in sales of houses priced $100,000 (£78,814) and below. The Realtors group said there was strong demand in this market segment, but not enough homes available for sale. The inventory of housing in this price bracket dropped 17.3% from a year ago.
The NAR said last year’s revamp of the U.S. tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was hurting sales of homes priced $1 million and above. There has been a marked drop in sales in high tax states such as New Jersey and Connecticut.
The overall weakness in the housing market is despite lower mortgage rates. The 30-year fixed mortgage rate has dropped to an average of 4.07% from a more than seven-year peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac.
This follows a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.
The PHLX housing index was trading higher, tracking a broadly firmer U.S. stock market. The dollar rose against a basket of currencies. Prices of U.S. Treasuries fell.
Housing supply remains tight, especially at the lower end of the market because of land and labour shortages. The government reported last week that permits to build single-family homes fell for a fifth straight month in April, touching their lowest level since November 2016.
A survey last week also showed that while single-family home builders were the most optimistic in seven months in May, they complained that they “continue to deal with ongoing labour and lot shortages and rising material costs that are holding back supply and harming affordability.”
Last month, existing home sales fell in the Northeast and South. They were unchanged in the Midwest and rose in the West.
There were 1.83 million previously owned homes on the market in April, up from 1.67 million in March and 1.8 million a year ago. At April’s sales pace, it would take 4.2 months to exhaust the current inventory, up from 3.8 months in March.
A six-to-seven-month supply is viewed as a healthy balance between supply and demand. The median existing house price increased 3.6% from a year ago to $267,300 in April.
Last month, houses for sale typically stayed on the market for 24 days, the shortest since May 2011 when the NAR started tracking the series, down from 36 days in March and 26 days a year ago. About 53% of homes sold in April were on the market for less than a month.
First-time buyers accounted for 32% of sales last month, down from 33% in March and a year ago. Economists and realtors say a 40% share of first-time buyers is needed for a robust housing market.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)