Existing home sales rebound in February

Sales of existing homes in the United States were up in February after two months of declines, according to the National Association of Realtors. The organization said that while wintry conditions kept sales down in the Northeast and Midwest, strong performances in the South and West offset those declines.

The seasonally adjusted annual sales rate for existing single-family homes, condominiums, co-ops, and townhomes stood at 5.54 million, a jump of 3 percent from January and 1.1 percent from a year ago. The gain follows a month-to-month decrease of 3.2 percent in January and 3.6 percent in December.

"The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018," said Lawrence Yun, chief economist at the National Association of Realtors. "However, even as seasonal inventory gains helped boost sales last month, home prices—especially in the West—shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar."

Existing sales in the West were up 11.4 percent from January and 2.4 percent from February 2017 to an annual rate of 1.27 million. In the South, the annual rate rose 6.6 percent from the previous month and 3.4 percent from the previous year to 2.41 million.

Sales were down considerably in the Northeast, falling 12.3 percent from January and 7.2 percent from February 2017 to an annual rate of 640,000. The annual rate of existing sales in the Midwest was 1.22 million, a drop of 2.4 percent from the previous month but unchanged from the previous year.

Yun said frigid temperatures during the month may have convinced potential buyers to delay their home search. He said a similar decline in sales may be in store for the Northeast in March due to a series of late winter nor'easters.

The bump up in existing sales occurred despite the persistent hurdles of reduced inventory and higher prices. There were 1.59 million existing homes for sale in February, a 4.6 percent increase from January but an 8.1 percent reduction from the previous year – the 33rd consecutive month of year-over-year declines in available listings.

The median price on an existing home purchased in February was $241,700, up 5.9 percent from February 2017. The median price on existing home sales has gone up for six straight years.

Single-family homes accounted for the bulk of sales with a seasonally adjusted annual rate of 4.96 million – up 4.2 percent from January and 1.8 percent from February 2017. The median price for a single-family home sold during the month climbed 5.9 percent from the previous year to $243,400.

Condominium and co-op sales had a poorer performance in February, dropping 6.5 percent from the previous month and 4.9 percent from the previous year to a seasonally adjusted annual rate of 580,000 units. Prices for these properties continued to climb, however, with the median sales price increasing 5.7 percent to $227,300.

Prices varied considerably by region, and homes in the West were by far the most expensive. A median priced existing residence in this region sold for $370,600, a year-over-year increase of 9.6 percent.

Existing home prices in the Northeast were up 3.6 percent from the previous year to $258,900. Median prices were also up 5.4 percent to $215,700 in the South and 4.5 percent to $179,400 in the Midwest.

According to Freddie Mac, the average commitment rate for a 30-year conventional fixed rate mortgage was 4.33 percent in February. This was the highest average rate since April 2014, when it stood at 4.34, and up 0.3 percentage points from January. In 2017, the average commitment rate was 3.99 percent.

"Mortgage rates are at their highest level in nearly four years, at a time when home prices are still climbing at double the pace of wage growth," said Yun. "Homes for sale are going under contract a week faster than a year ago, which is quite remarkable given weakening affordability conditions and extremely tight supply. To fully satisfy demand, most markets right now need a substantial increase in new listings."

The typical existing home sold in February found a buyer in 37 days. This period sped up from 41 days in January and 45 days in February 2017. Forty-six percent of existing homes sold in the month were purchased within a month of listing.

First-time buyers accounted for 29 percent of existing home purchases in February, the same share as in January but down from both 31 percent in February 2017 and 34 percent for last year's average. Elizabeth Mendenhall, president of the National Association of Realtors, said people buying their first home are often facing more competition for more affordable properties.

"Realtors in several markets note that entry-level homes for first-timers are hard to come by, which is contributing to their underperforming share of overall sales to start the year," said Mendenhall. "Prospective buyers should start conversations with a Realtor now on what they want in a new home. Even with the expected uptick in new listings in coming months, buyers in most markets will likely have to act fast on any available listing that checks all their boxes."

All-cash sales were slightly more prominent, accounting for 24 percent of existing home sales. This was up from 22 percent in the previous month and the highest share since 27 percent in February 2017.

Individual investors, who often buy a property with cash, purchased 15 percent of the existing homes sold in February. This share was unchanged from the previous year, but down from 17 percent in the previous month.

Distressed properties were less common, accounting for 4 percent of all existing home sales – down from 5 percent in January and 7 percent in February 2017. Three percent of the month's sales were foreclosures, while 1 percent were short sales.

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