Ripples of the lackluster activity witnessed in the housing sector during the final weeks of last year are yet to die down, largely owing to unfavorable weather conditions. The result is a sharp fall in new home sales in January.
The housing markets in Northeast and South, which account for over 75% of the total single-family residence sales, plunged 33% and 14% respectively, triggering the overall downturn. Meanwhile, sales were up 1% in the West and 15% in the Midwest.
The tax reform brought in by the Federal Government last year, which evoked a mixed reaction, exacerbated the housing slump. According to experts, higher mortgage rates and relatively weak supply prompted buyers to postpone their purchases. Particularly, first-time buyers were discouraged by the shortage, which was more pronounced in the lower end of the market.
Data published by the Commerce Department on Monday revealed that sale of newly-built residential units plunged 7.8% to a seasonally adjusted 593,000 in January, marking the second consecutive sequential decrease. There was a high degree of contrast with the expectations of economists, who had forecast a modest increase. Sales dropped 1% compared to January 2016, to hit the lowest level since August 2017.
Though the stock of new homes increased during the month, it remained well below its peak during the 2006 housing boom. The median price of a residential unit declined 4% month-on-month to $323,000.
The outlook for the housing sector remains downbeat, with most of the market watchers predicting further hikes in mortgage rates.
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