The Commerce Department said Wednesday that new home sales slipped 0.2 per cent last month to a seasonally adjusted annual rate of 481,000. This marks a slight decrease from sales of 482,000 homes in December, but represents a solid 5.3 per cent gain from a year ago when harsh winter weather caused home-buying to stall.
Despite the increasingly favourable economy, home sales have been sluggish at the start of the year. Snow has buried parts of the Northeast and Midwest, cutting into open house visits. Too few homes are being listed for sale, and those that are on the market still seem to be out of reach for many prospective buyers despite the recent hiring surge and historically low interest rates.
Sales of existing homes last month sank 4.9 per cent to a seasonally adjusted annual rate of 4.82 million. Contributing to that nine-month low was a tight inventory of homes on the market that sent prices higher. That may be pushing some home shoppers to wait for more choices at more inviting prices.
But builders have yet to significantly increase construction.
Many firms are focused on selling to wealthier buyers, instead of competing on volume by constructing more houses at more affordable levels. The median sales price rose 9.1 per cent since January 2014 to $294,300.
Toll Brothers, which specializes in higher-end homes, reported Monday that its quarterly profits shot up 78 per cent as the average price of a home sold by the Pennsylvania builder climbed to $821,500 from $766,100.
And instead of upgrading to new houses, some homeowners are renovating their current properties, said Nino Sitchinava, principal economist at Houzz, the online resource for remodeling and home design.
In many instances, baby boomers are putting in new kitchens and bathrooms, in addition to adapting their houses in order to age in place, Sitchinava said.
The winter weather caused sales of new homes to halve in the Northeast, while the West experienced a slight drop and the South and Midwest each reported gains, according to the Commerce Department report.
Home values are appreciating at a slower rate since 2014, yet they continue to outpace wage gains.
Average hourly wages grew 2.2 per cent over the past 12 months, which is roughly half of the increase in home values, according to the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday.
Economists do see reasons why home sales should improve this spring.
Mortgage rates remain near historic lows. The average 30-year fixed mortgage rate was 3.76 per cent last week, according to the mortgage giant Freddie Mac. That has ticked up in recent weeks, but is far below the 4.33 per cent average from a year ago.
And employers have hired at an accelerated clip over the past year. In the past three months alone, the U.S. economy has added more than 1 million jobs, the fastest three-month pace in 17 years. More Americans earning paychecks should eventually push home sales higher.