Weather Contributes to Lower Home Sales in January

The 9.2-percent decline in new home sales is balanced against continuing low mortgage rates that provide a solid outlook for the year.

Lauren Spiers

Published March 11, 2005

The National Association of Home Builders (NAHB) reports that unusually snowy conditions in the Midwest and Northeast contributed to a 9.2-percent decline in sales of newly built single-family homes in January, noting that demand in the nation’s housing market remains solid.
 
“It’s important to avoid a knee-jerk reaction to this report,” said NAHB President Dave Wilson, a custom homebuilder from Ketchum, Idaho. “The fact is that weather was a major factor in the decline, with unusually harsh winter conditions contributing to a 40-percent drop in the Midwest alone. Our latest builder surveys indicate that the fundamentals of the nation’s housing market remain very solid.”

Additionally, NAHB Chief Ecnomist David Seiders added that the January decline is from a number that the U.S. Department of Commerce revised upward by 11 percent since its previous report. “On balance, the housing market is still definitely in good shape,” Seiders says. “Our latest builder surveys, continuing low mortgage rates and solid growth in employment and household income all bode well for builders in the months ahead.”

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New home construction fell in January, but the National Association of Home Builders expects a rebound. Photo: U.S. Department of Housing and Urban Development

Indeed, the average rate of a 30-year fixed-rate mortgage remains low at 5.85 percent as of this week. While this represents the fourth consecutive rate increase and the highest rate since August of 2004, it is still only about half a percentage point higher than the record low set in May 2003 of 5.31 percent.

Lawn and landscape contractors also can remain confident in light of this news, as their work is partly tied to homeownership. On that front, last year’s record-breaking home sales now stand at 1.2 million – an all-time record that’s 10.5 percent ahead of the previous record set in 2003, according to NAHB. 
 
On a national basis, new-home sales fell from December’s seasonally adjusted annual pace of 1.22 million units to a seasonally adjusted annual rate of 1.11 million units in January. Regionally, snowy weather in the Midwest contributed to a dramatic 40.3-percent decline in home sales there during January. The Northeast also felt the pinch of wet and snowy conditions, posting a 17.1 percent decline from December, while the South posted the smallest decline, of 3.3 percent, and the West actually gained 5.6 percent.

Meanwhile, NAHB said the number of unsold new units on the market in January climbed 3.5 percent to 438,000 or a 4.7-month supply at the current sales pace. “A good portion of the units reflected in this inventory have been permitted but not yet started,” noted Seiders. “The bottom line is that supply and demand in the new-home market are well balanced, and we’re only looking for a modest setback of between 3 and 4 percent for home sales this year as the interest rate structure gravitates upward. This housing market still has plenty of strength going forward.”

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Further evidence of that strength is represented in homeownership rates, which continue to rise across the country. According to the U.S. Census Bureau, homeownership rates increased nationally and in each region of the country from 2003 to 2004. The current national rate of homeownership is 69 percent, up from 68.3 2003. This also represents a 6-percent increase over the last decade from 64.7 percent in 1995 to 69 percent in 2004. Check the table below for data on homeownership in your area.

Homeonwership Rates
1995 to 2004		 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
U.S. Overall 64.7% 65.4% 65.7% 66.3% 66.8% 67.4% 67.8% 67.9% 68.3% 69%
Northeastern U.S. 62% 62.2% 62.4% 62.6% 63.1% 63.4% 63.7% 64.3% 64.4% 65%
Midwestern U.S. 69.2% 70.6% 70.5% 71.1% 71.7% 72.6% 73.1% 73.1% 73.2% 73.8%
Southern U.S. 66.7% 67.5% 68% 68.6% 69.1% 69.6% 69.8% 69.7% 70.1% 70.9%
Western U.S. 59.2% 59.2% 59.6% 60.5% 60.9% 61.7% 62.6% 62.5% 63.4% 64.2%

The U.S. Census Beaurau defines each region of the country as:

  • Northeast:  Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, New Jersey, New York, Pennsylvania
  • Midwest:  Illinois, Indiana, Michigan, Ohio, Wisconsin, Iowa, Kansas,
    Minnesota, Missouri, Nebraska, North Dakota, South Dakota
  • South:  Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, Texas
  • West:  Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming, Alaska, California, Hawaii, Oregon, Washington

Also, check Lawn & Landscape magazine's 2004 State of the Industry report for additional regional data related to the green industry in particular. The report is available in PDF format by clicking here. 

The National Association of Home Builders contributed to this report.

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