As interest rates rise, US home sales fall for 12th straight month

CHICAGO: A National Association of Realtors study released this week reported that in January, US existing home sales dropped to their lowest level in more than 12 years.

However, the pace of the decline has slowed, causing optimism that the downward trend could have reached its lowest level.

The report also highlighted the smallest increase in annual house prices since 2012, indicating that homes are becoming more affordable.

Robust retail sales and labor market data indicated that mortgage rates are again rising, while monthly inflation statistics raised the prospect of the Federal Reserve maintaining its interest rate hikes throughout the summer.

"The marginal decline in existing home sales in January supports our view that housing market activity is reaching a trough," said Sam Hall, property economist at Capital Economics, as quoted by Reuters.

Last month, existing home sales fell to a seasonally adjusted annual rate of 4 million units or 0.7 percent, the lowest level since October 2010, when a foreclosure crisis was affecting the US.

Meanwhile, a Reuters poll forecast home sales to increase to a rate of 4.10 million units, while home resales, which has the highest allocation of US housing sales, dropped 36.9 percent year-on-year in January.

The housing market has been the largest casualty of the Fed’s aggressive monetary policy tightening, and government data released last week showed that single-family home building and permits for future home construction declined in January.

Data from mortgage finance agency Freddie Mac showed that 30-year fixed mortgage rate increased to an average 6.32 percent last week from 6.12 percent the previous week.

However, while morale remains depressed, confidence displayed by home builders rose to a five-month high in February.

Properties typically remained on the market for 33 days last month, up from 26 days in December.

"Buyers are beginning to have better negotiating power," noted National Association of Realtors’ chief economist Lawrence Yun, as reported by Reuters.