Another month, another rash of bad news for the US housing market.
The National Association of Realtors on Thursday released the January numbers for existing home sales, which fell 8.5% from last year to a rate of 4.95 million.
That’s the lowest level in more than three years, and it follows a series of gloomy results in the closing months of 2018.
US existing-home sales cratered to 4.99 million in December, 10.3% below the mark from the year-ago period. That followed year-over-year declines of 7.8% in November and 5.1% in October, according to the NAR.
NAR released data earlier this month showing that pending home sales also fell in December to 2.2%, the lowest point since 2014.
UBS analysts, amid the ugly housing numbers, wrote in a note last month that “the deterioration in housing and its intensification since midyear raise the possibility of underlying weakness in the household sector.”
Causes for the slowdown are myriad, but experts have pinned much of the blame on higher interest rates and home prices. The median home increased to $247,500 in January, the 83rd straight month of year-over-year gains, according to the NAR.
That’s dampening enthusiasm from cash-strapped and debt-burdened millennials.
But Lawrence Yun, NAR’s chief economist, said the home-sales drought had hit its cyclical low and that he expects sales to rebound going forward.
“Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months,” Yun said in an NAR statement.
Loosening standards by mortgage lenders could also contribute to a turnaround in sales, though lower credit standards also carry the risk of ramping up loan delinquencies.
The housing malaise has taken a toll on mortgage companies, as revenues got whacked in 2018 and profit outlook for 2019 remains bleak.
“Over the last year, residential mortgage loan profitability has declined significantly as loan originations and margins have fallen given higher interest rates, and as refinance originations have plummeted,” Moody’s wrote in a report last week.
The ratings agency expects residential mortgage originators, crunched by these economic headwinds, to “loosen underwriting standards for purchase loans, which will lead to modest growth in residential mortgage balances.”
That could precipitate a run-up in mortgage delinquencies, which ticked up to 3.55% in the fourth quarter, according to Federal Reserve data.
Moody’s projects delinquent mortgage loans, which are hovering near post-crisis lows, will increase modestly over the coming year.
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