As the once-sizzling housing market cooled further, sales of existing homes fell for a fifth consecutive month in January.
Sales of previously owned homes dropped by 2.8 percent compared to a seasonally adjusted annual rate of 6.56 million units, the slowest pace in two years, as the National Association of Realtors reported Tuesday.
Home prices held steady with the median price in January at $211,000, unchanged from the December level, even with the slowdown in sales.
The drop in sales of existing homes followed a 5 percent decline in sales of new homes in January as that segment of the market cooled as well. Both declines were bigger than expected and occurred even though the weather in January was the mildest in more than 100 years.
Analysts saw the declines in both existing and new home sales as strong signals that the once-hot housing market has begun to cool. Sales were down in all regions of the country except the South, which saw a 2.6 percent increase.
Sales were down 7.7 percent in the Midwest and fell 3.5 percent in the West. The biggest sales decline last month was a 10 percent drop in the Northeast. The five consecutive declines in existing home sales represented the longest stretch of weakness since a stretch of six monthly declines from July through December of 1999.
At the January sales pace, the inventory of unsold homes rose by 2.4 percent at the end of January to 2.91 million existing homes available for sale, which represents a 5.3-month supply of homes.
Instead of double-digit gains, Lawrence Yun, senior economist at the Realtors, said he was looking for a more moderate rise of 5 percent in prices this year. Analysts said the rising supply of unsold homes will likely slow the rapid increase in home prices of recent years.
Places which are more sensitive to increases in mortgage rates, have sales suffering the most in high-priced parts of the country in California, Florida and the Northeast.
The Realtors said that home sales in New Orleans were up 40 percent in January with Baton Rouge, La., Mobile, Ala., and Houston seeing big gains in home sales as well. The South, which was battered by last year's Gulf Coast hurricanes, is seeing a rebound in some areas, helped by people looking for homes to replace ones damaged by the storms.
But most analysts believe the housing market is headed for a slowdown but not a crash. The big concern has been whether the slowdown in sales would cause home prices to come crashing back to earth.
By: Dijon Wainwright