February existing-home sales and prices affirm a healthy recovery is underway in the housing sector, according to the
National Association of REALTORS®. Sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year price increases.
Total
existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 0.8 percent to a seasonally adjusted annual rate of 4.98 million in February from an upwardly revised 4.94 million in January, and are 10.2 percent above the 4.52 million-unit level seen in February 2012. February sales were at the highest level since the tax credit period of November 2009.
Economic Recovery
Lawrence Yun, NAR chief economist, said conditions for continued housing improvement are at play. “Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise. Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchases affordable,” he said. “The only headwinds are limited housing inventory, which varies greatly around the country, and credit conditions that remain too restrictive.”
Total housing inventory at the end of February rose 9.6 percent to 1.94 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace, up from 4.3 months in January, which was the lowest supply since May 2005.Listed inventory is 19.2 percent below a year ago when there was a 6.4-month supply.
The national median existing-home price for all housing types was $173,600 in February, up 11.6 percent from February 2012. The last time there were 12consecutive months of year-over-year price increases was from June 2005 to May 2006. The February gain is the strongest since November 2005 when it was 12.9 percent above a year earlier.
“A strong rise in home values is contributing to housing wealth recovery, which has risen by $1.4 trillion in the past year and looks to top that increase this year,” Yun said. “The extra consumer spending arising from growth in housing wealth is expected to be $70 billion to $110 billion this year.”
Distressed homes — foreclosures and short sales — accounted for 25 percent of February sales, up from 23 percent in January but down from 34 percent in February 2012. Fifteen percent of February sales were foreclosures, and 10 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in February, while short sales were discounted 15 percent.
According to Freddie Mac, the
national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.53 percent in February from 3.41 percent in January; it was 3.89 percent in February 2012.
NAR President Gary Thomas said interest rates remain extraordinarily low. “In the history of mortgage interest rates since 1971, the 30-year fixed rate has been below 4 percent in only 15 months, and those have all been in the past 15 months,” he said. “Even with rising home prices, affordability remains historically favorable because home prices over-corrected during the downturn. This means there is still great value for buyers in the current market.”
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“The housing turnaround seems to have caught almost everyone in the business by surprise,” The New York Times reports. “As desirable as the long-awaited improvement may be, the unusually low level of homes for sale is creating widespread problems for buyers and sellers alike, leading to bidding wars and bubble-like price jumps in places that not long ago were suffering from major declines.”
After years of not building, homebuilders are scrambling to ramp up production to meet demand, but they’re facing delays from the availability of lots, scarcity of qualified labor, and obtaining permits.
Meanwhile, investors have snagged foreclosures and short sales, limiting the availability of those on the market as well.
In addition, more home owners — once underwater — are seeing the return of equity again for the first time in years, but still may be reluctant to sell as they wait for home prices to rise even more. Or, they might be wary of being displaced themselves if they sell due to the sudden buying frenzy, The New York Times notes.
“You see a home go for sale and within a couple days there are three, four, six offers,” says home buyer Carrie Miskawi, who has been looking for a new home for the last six months.
Sacramento real estate agent Tom Phillips says he’s even resorted to knocking on doors of homes to see if the owners might consider selling to one of his clients.
The number of homes for sale is at its lowest level since 1999, according to the National Association of REALTORS®. But with mortgage rates still low and home prices off their peak, buyers are viewing it as an opportunity to jump in.
Source: “Sudden Rise in Home Demand Takes Builders by Surprise,” The New York Times (March 20, 2013)
