New single-family home sales in the U.S. tumbled in January after recording a 10-month high rise. However, even with new home sales in West regions plummeting, the overall market recovery in housing remains intact.
Other data released on Wednesday indicated that the services sector contracted early February for the very first time in three years. This comes amid growing concerns of weakening economic conditions.
According to the Commerce Department, single-family home sales recorded a considerable drop, reaching 9.2% in January to 494,000 units, a seasonally adjusted rate annually. Compared to December, it was almost unwinding the sharp increase experienced in the month. Economists predicted that new home sales would account for 8.3% of the entire housing market, but slipped to only unit rate of 520,000 in January.
Home sales recorded in the West regions have seen a significant rise in prices in the past, owing this to tight inventories. This time they plummeted to 32.1%, which happens to be their lowest level since mid 2014. This decline is also the largest to be recorded since May 2010.
In the Northeast, home sales rose to an impressive 3.4%, with the populous South only recording 1.8% rise. The sales however decreased in the Midwest by 5.9%. PHLX housing index .HGX, which includes mortgage companies, building products and builders, rose about 0.3%. This means that they outperformed a generally weaker stock market.
Housing sector remains supported by the tightening labor market that’s bolstering household formation and lifting wage growth. According to reports released earlier on Tuesday, sales from previously owned homes recorded a 6-month high last month, with the house prices rising to 5.7% in the year. Although the number of applications for mortgage fell last week, reports indicated that they retained half of the increase in that week.
Another report on services sector indicated that PMI business activity index fell to 49.8 in the month of February from 53.2 in January, in the U.S. It is expected that the economy will likely be boosted by a firmer housing market as it fights the effects being experienced because of a stronger dollar, global demand and huge spending cuts by various energy firms. All in all, the housing market is still tight and in relatively great shape.