A Commerce Department report released Wednesday showed new home sales in the U.S. declined in January, with buyers passing on increased inventory. While supply rose 1.4 percent last month to 218,000, its highest level since 2010, as with existing home sales data released earlier this week, the report shows potential buyers are not pulling the trigger.
The Commerce Department said on Wednesday that U.S. single-family home sales fell 0.2 percent to a seasonally adjusted annual rate of 481,000 units. December’s sales pace was revised up to 482,000 units, which was the highest level since June 2008, up from 481,000 units.
Officials at the Commerce Department attempted to explain the abysmal data from last month as a result of weather in the Northeast, citing that sales recorded their biggest drop since June 2012 in the region.
However, although the report was on a whole negative, economists polled by Reuters had forecast new home sales to fall by a 470,000-unit pace last month instead. New home sales account for roughly 9.1 percent of the housing market and, when compared to January of last year, were up 5.3 percent.
Still, the housing market continues to struggle despite the artificial and increasing risk injected into the sector by the Federal Housing Administration (FHA) and other federal agencies.
The riskiness of mortgage loan originations in the U.S. housing market rose in January, marking the fifth straight month of risk increases. AEI’s composite National Mortgage Risk Index (NMRI) for Agency purchase loans hit a new series high of 11.94 percent in January, up 0.4 percent from the prior 3-month average and 0.8 percent year-over-year.
“With the NMRI once again hitting a series high, the risks posed by the government’s 85% percent share of the home purchase market continue to rise,” said Stephen Oliner, codirector of AEI’s International Center on Housing Risk.
The composites subindexes gauging risk for Fannie Mae, the FHA, and the Veterans Administration (VA) all hit new series highs in January, as well.
“Policy makers need to be mindful of the upward risk trends that are occurring with respect to both first-time and repeat buyers,” said Edward Pinto, codirector of AEI’s International Center on Housing Risk. “Recent policy moves by the FHA and FHFA will likely exacerbate this trend.”
Yet, the National Association of Realtors, the single-most powerful housing market lobby, is still urging the FHA to further loosen restrictions on lending practices. They cite the latest existing home sales data as evidence of urgency.
But regardless of government interference, it is non-existent wage growth and slightly higher prices that are sidelining first-time buyers. The most recent data showed not only a plunge in home resales in January, but weak single-family housing starts and permits.
In December, new home sales in the Northeast tanked by 51.6 percent, hitting a record low. But the weakness was across-the-board, not regional as Commerce suggested. Sales in the South rose by 2.2 percent and fell 0.8 percent in the West. Only the Midwest saw a surge of 19.2 percent.
Inventories still remain less than half of what they were before the crash.
At January’s sales pace it would take 5.4 months to clear the supply of houses on the market, unchanged from December. The median new home price rose 9.1 percent from a year ago to $294,300.