Existing-Home Sales Post 'Surprising' Gains

Existing-home sales rose strongly in February reaching the highest level since last April, and follows a healthy gain from January, according to the NATIONAL ASSOCIATION OF REALTORS®.
REALTOR® Magazine Online
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — rose 3.9 percent to a seasonally adjusted annual rate of 6.69 million units in February from a downwardly revised level of 6.44 million in January. Still, the numbers are 3.6 percent below the 6.94 million-unit pace in February 2006.

Nevertheless, last month’s increase was the biggest monthly rise in three years — sales last rose 3.9 percent in March 2004.

David Lereah, NAR’s chief economist, says the strong gain is a bit of a surprise.

“Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he says. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed rate was 6.22 percent in January, and 6.25 percent in February 2006.

NAR President: Median Home Price Distorted

The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Pat Vredevoogd Combs says the median home price currently is distorted. “Over the last year, we’ve seen declining sales in many high-cost areas but rising activity in lower cost markets,” she says. “This change in the geographic composition of sales means we aren’t getting apples-to-apples comparisons in median home prices from a year ago.”

Other indices examining sales of the same properties over time, such as the OFHEO House Price Index, have been showing price gains; however, the OFHEO index is limited to conventional financing.

“What’s really happening is probably somewhere in between the different measures, but home prices are soft — a year ago we were still seeing bidding pressures and double-digit price growth,” Combs says. “Overall, home prices should rise slowly this year, and many buyers have an opportunity now that was only a dream during the five-year boom.”

A Closer Peek at Sales

Some other key findings from NAR's latest housing report:

    • Total housing inventory levels rose 5.9 percent at the end of February to 3.75
      million existing homes available for sale. That represents a 6.7-month supply
      at the current sales pace compared with a 6.6-month supply in January. Raw
      inventories peaked last July at 3.86 million, and supplies topped at 7.4
      months in October.

    • Single-family home sales increased 3.7 percent to a seasonally adjusted annual
      rate of 5.88 million in February, from 5.67 million in January. But those
      sales numbers are 3.4 percent below the 6.09 million-unit pace in February
      2006. The median existing single-family home price was $211,100 in February,
      down 1.5 percent from a year ago.

    • Existing condominium and co-op sales jumped 5.3 percent to a seasonally
      adjusted annual rate of 810,000 units in February, from a level of 769,000 in
      January. February sales are 5.2 percent below the 854,000-unit pace in
      February 2006. The median existing condo price was $225,400 in February, up
      0.5 percent from a year earlier.

Regional Snapshot

Here's a closer look by region of existing-home sales in February:

    • Northeast: existing-home sales surged 14.2 percent to a level of 1.21 million
      in February, and are 3.4 percent higher than February 2006. The median
      existing-home price in the Northeast was $265,900, down 1.4 percent from a
      year earlier.

    • Midwest: existing-home sales rose 3.9 percent in February to a level of 1.58
      million, but are 1.9 percent below a year ago. The median price in the Midwest
      was $157,000, down 1.3 percent from February 2006.

    • South: existing-home sales increased 1.6 percent to an annual sales rate of
      2.58 million in February, but are 4.4 percent below February 2006. The median
      price in the South was $175,900, down 2.9 percent from a year ago.

    • West: existing-home sales went unchanged in February, holding at an annual
      pace of 1.32 million. Sales are 9.6 percent lower than a year ago. The median
      price in the West was $337,100, up 2.2 percent from February 2006.