High oil prices are threatening recovery in the one sector of the economy hit hardest by the Great Recession: the housing market.
While purchases of existing homes gained 2.7 percent to 5.36 million in January, sales of new homes fell a larger-than-expected 12.6 percent to just 284,000 units, the Wall Street Journal reports.
The housing market was never expected to come roaring back to life in 2011, but hopes that improving unemployment rates, loose monetary policy and more economic activity in general would strengthen the housing sector were on the rise.
|A for sale sign in front of a Miami home.
Then oil prices rose due to Middle East turmoil and with them, fuel prices went up as well.
"The oil-related drag on output, however, means fewer jobs. And faster job growth was a key support for housing in 2011," the newspaper reports.
"That is why the housing outlook looks more precarious than it did just a few weeks ago."
The National Association of Realtors, meanwhile, says its index of sales agreements for previously occupied homes fell 2.8 percent in January to a reading of 88.9, the second straight monthly decline, the Associated Press reports.
The reading was higher than the 75.9 reading from June, the low point since the housing bust, but below 100, which is considered a healthy level
Economists say the figure does not bode well for the housing market.
"We can't blame weather as three of the four regions saw a decline," Jennifer Lee, senior economist for BMO Capital Markets, tells the Associated Press.
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