Data on new home sales was lukewarm, falling slightly but still near multi-year highs, with December revised upward, despite freezing temperatures in the Northeast region of the U.S. Bobbi Rebell reports.
Despite freezing temperatures and piles of snow in much of the Northeast, sales of new U.S. single family homes fell only slightly in January, and supply rose to its highest level since 2010. The Commerce Department said on Wednesday that sales dipped 0.2 percent to a seasonally adjusted annual rate of 481,000 units. December's sales pace was revised up to the highest level since June 2008. In the Northeast region - where the snowstorms hit - sales recorded their biggest drop since June of 2012. It's the continuation of a trend, housing hit a speed bump in the second half of 2013. Low wage growth, along with tight home inventories and higher prices sideline first-time buyers: IHS Global Insight's Patrick Newport: (SOUNDBITE) PATRICK NEWPORT, U.S. ECONOMIST, IHS GLOBAL INSIGHT (ENGLISH) SAYING: "We're just not seeing a lot of growth in household formation. And that's really what drives housing starts and new home sales over the long term. And, the reason for that is that young adults, men and women in their 20's and early 30's are just delaying moving out of their home, and that's probably related to the state of the economy. The fact that the labor market still hasn't improved to the point where they can get good jobs and also that the fact that their real earnings are about 10% lower than they were prior to the recession." Even though mortgage rates are at record lows, the housing sector is lagging the overall economy. And home resales plunged last month. But Newport is optimistic: (SOUNDBITE) PATRICK NEWPORT, U.S. ECONOMIST, IHS GLOBAL INSIGHT (ENGLISH) SAYING: "I think credit standards are easing and that will help. What will also help is, I think, construction costs are going to go down because of the stronger dollar and because oil prices have gone down and because there will be more workers moving form the oil fields into the construction sector. That will help somewhat." And the Mortgage Bankers Association said its measure of loan requests for home purchases, a leading indicator of home sales, increased 4.6 percent last week, rising for the first time in six weeks.