Spring sales of existing homes get off to a strong start
Melting snow and warmer temperatures traditionally mark the start of increased real estate activity, and this year's spring sales rocketed out of the gate.
According to the National Association of Realtors, existing home sales in March stood at a seasonally adjusted annual rate of 5.71 million. This figure was up 4.4 percent from a downwardly revised pace of 5.47 million in February and 5.9 percent from March 2016. It marked the strongest level of sales since February 2007, which had an annual rate of 5.79 million.
Existing home sales are defined as completed transactions involving single-family homes, townhouses, condominiums, and co-ops. Lawrence Yun, chief economist at the National Association of Realtors, credited the boost in the sales rate to underlying demand as well as higher consumer confidence.
"The early returns so far this spring buying season look very promising, as a rising number of households dipped their toes into the market and were successfully able to close on a home last month," said Yun. "Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does."
The inventory of existing homes for sale has been dwindling for 22 consecutive months. While March's supply of 1.83 million properties was up 5.8 percent from the previous month, it was still 6.6 percent lower than the same time in 2016.
The limited supply of housing has contributed to rising prices among available homes. The median price for an existing home in March was $236,400, a year-over-year increase of 6.8 percent. This was the 61st consecutive month where the median price has been higher than the previous year.
Buyers were also quick to snap up listings as they became available. A typical property sold in 34 days, 11 days faster than the previous month and 13 days faster than the previous year. Forty-eight percent of homes were listed for less than a month, and non-distressed homes typically sold in 32 days – the shortest listing time since the National Association of Realtors began tracking this information in May 2011.
"Last month's swift price gains and the remarkably short time a home was on the market are directly the result of the homebuilding industry's struggle to meet the dire need for more new homes," said Yun. "A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy."
Buyers also had to contend with higher mortgage rates in March. According to Freddie Mac, the average rate for a 30-year fixed rate conventional mortgage during the month was 4.2 percent. This was the fifth consecutive month of rate increases, rising from 4.17 percent in February and a 2016 average of 3.65 percent.
Thirty-two percent of existing home sales in March were made to buyers purchasing their first home. This share of first-time buyers was unchanged from February and up from 30 percent in March 2016.
Distressed sales made up only 6 percent of existing home sales, down from 7 percent in the previous month and 8 percent in the previous year. Foreclosures made up 5 percent of sales, while short sales accounted for 1 percent.
The typical foreclosure sale was on the market for 52 days and sold at 16 percent below market value. Short sales were on the market for a median of 90 days and sold at a typical discount of 14 percent.
Investor activity declined in March, with individual investors making up 15 percent of existing home sales. This was down from 17 percent in February, but up from 14 percent in March 2016.
Sixty-three percent of investors financed their purchase with cash, and all-cash transactions made up 23 percent of sales. This share fell from 27 percent in the previous month and 25 percent in the previous year.
Single-family homes accounted for most sales, with a seasonally adjusted annual sales rate of 5.08 million. This pace was up 4.3 percent from February and 6.1 percent from March 2016. The median price of a single-family home rose 6.6 percent from the previous year to $237,800.
The rate of condominium and co-op sales was up 5 percent from both the previous month and previous year to stand at 630,000 units. The median price for this type of housing was $224,700, up 8 percent from March 2016.
Sales growth was most pronounced in the Northeast and Midwest. In the former region, the annual rate of 760,000 sales marked an increase of 10.1 percent from February and 4.1 percent from March 2016. The median price of a home in the Northeast climbed 2.8 percent to $260,800.
In the Midwest, the sales pace increased 9.2 percent from the previous month and 3.1 percent from the previous year to 1.31 million. A median priced home in this region sold for $183,000, a year-over-year increase of 6.2 percent.
Price growth was strongest in the South, where the median price of $210,600 marked an 8.6 percent increase from the previous year. The sales rate of 2.42 million was up 3.4 percent from February and 8.5 percent from March 2016.
The West was the only region with some decline in sales in March. The annual sales rate of 1.22 million was down 1.6 percent from the previous month, but still up 5.2 percent from the previous year. The median sales price jumped 8 percent from the previous year to stand at $347,500.
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