Will the Housing Market Thaw Out This Spring?
After posting the best year since before the housing bust, existing-home sales continued to decline last month and reached their worst level in 19 months. Further, housing affordability issues remain as home prices push higher.
The National Association of Realtors announced Thursday that total existing-home sales — which are completed transactions of single-family homes, town homes, condos, and co-ops — fell 0.4 percent to a seasonally adjusted annual rate of 4.60 million units in February compared to 4.62 million units in the previous month. Sales have now declined six of the past seven months.
On the positive, the results were in-line with expectations, which is a pleasant surprise. Prior to February’s reading, sales missed estimates for seven consecutive months. However, existing-home sales are still 7.1 percent below the 4.95 million-unit level seen a year earlier. This is the fourth consecutive month that sales were below year-ago levels, and February was the slowest since July 2012, when sales stood at 4.59 million.
The frigid weather conditions have received most of the blame in recent months for weak economic conditions, but there is optimism about the spring shopping season. “We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards, and housing affordability less favorable than a year ago,” said Lawrence Yun, NAR chief economist, in a press release. “Some transactions are simply being delayed, so there should be some improvement in the months ahead.”
Housing affordability issues kept many people on the sidelines. First-time buyers accounted for only 28 percent of purchases last month, up from 26 percent in January but down from 30 percent a year earlier. January was the worst showing for first-time buyers since the NAR started keeping track of the measurement in October 2008. A normal reading would be closer to 40 percent. Meanwhile, the median existing-home price for all housing types in January jumped 9.1 percent year-over-year to $189,000.
“The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” said NAR President Steve Brown, in a press release. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle.”
Existing-home sales were mixed across the four major regions of the nation. The Northeast plunged 11.3 percent in February and sales are 12.7 percent below February 2013. The Midwest also declined 3.8 percent, while sales in the South rose 1.5 percent. The West logged the biggest gain at 5.9 percent.
Last year, existing-home sales reached 5.09 million sales, which is 9.1 percent higher than 2012. It was also the best year since 2006, when sales hit 6.48 million units with the help of the housing bubble. However, momentum has been slowing as the housing market returns to a more sustainable pace. Additionally, more home buyers are using cash for their purchases. All-cash sales comprised 35 percent of the transactions in February, up from 33 percent in January and 32 percent a year earlier. Seventy-three percent of investors paid cash in February.
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