Existing homes sales dip in February
U.S. home sales are gradually coming back. A mild winter and a stronger job market have helped boost sales ahead of the crucial spring buying season.
The past two months made up the best winter for sales of previously occupied homes in five years, when the housing crisis began. And the sales pace in January was the highest since May 2010, the last month that buyers could qualify for a federal home-buying tax credit.
February sales dipped only slightly to a seasonally adjusted 4.59 million, the National Association of Realtors said Wednesday. That’s 13% higher than the sales pace last July and just below the revised 4.63 million in January.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the lower February’s numbers “should not detract from the key point, which is that sales are trending upward.”
The pace remains far below the 6 million that economists equate with healthy markets. And the number of first-time buyers, who are critical to a housing recovery, continues to lag normal levels, while foreclosures remain high.
Still, Chris Jones, economist at TD Economics, said the “economic environment is ripe for home sales to keep gaining pace.”
The median sales prices of homes rose for the first time in four months in February, to $156,600. And the supply of homes on the market increased more than 4% in February to 2.43 million, which could signal that more homeowners became confident in the housing market.
There have been other signs of improvement in the depressed housing market.
Homebuilders have grown more confident in the past six months after seeing more people express interest in buying a home. In February, they requested the most permits to build homes since October 2008.
Mortgage rates are near record lows. And the supply of homes fell in January to its lowest level in seven years.
A lower supply helps push up prices, which lures more sellers onto the market and generally improves the quality of homes for sale. Rising prices also boost sales because buyers want to invest in homes that are appreciating in value.
A key reason for the brighter housing outlook is the job market has strengthened. From December through February, employers added an average of 245,000 jobs a month. The unemployment rate has fallen to 8.3%, the lowest in three years.
Still, economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering.
Sales among first-time buyers, who are critical to a housing recovery, fell slightly last month to 32% of all purchases. That’s down from 33% in January. In healthy markets, first-time buyers make up at least 40%.
And homes at risk of foreclosure made up 34% of sales, down only slightly from 35% in January. In more stable markets, foreclosures make up less than 10% of sales.
For the past few years, the market has been saturated for years with foreclosures. That has put downward pressure on prices and driven away buyers.
Many can’t qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.
Sales are measured when buyers close on homes. Some deals have been scuttled before the closing after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.
One-third of Realtors say they’ve had at least one contract scuttled in each of the past five months. That’s up from just 18% in September.
Sales were mixed across the country. They rose on a seasonal basis 1% in the Midwest and 0.6% in the South. They dropped 3.2% in the West and 3.3% in the Northeast.