Existing-home sales suffered this month due to the continuous imbalance of extremely low inventory levels and rapid home price appreciation.
The report found that existing-home sales decreased 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. However, the report noted that despite last month's large decline, sales remain 2.2 percent higher than a year ago.
After suffering a major drop in November 2015 and recovering with the largest monthly increase ever recorded in December, existing-home sales seemed to have found their balance to start the new year–or so the industry thought.
The existing-home sales report from the National Association of Realtors (NAR) for January 2016, showed that lenders are well on the path to recovery from TRID delays. The report found that existing-home sales increased 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Existing sales are now 11.0 percent higher than a year ago, the highest annual rate in six months and the largest year-over-year gain since 16.3 percent July 2013.
The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings," said Lawrence Yun, NAR Chief Economist. "However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers."
Brian Montgomery, Vice Chairman of The Collingwood Group and former Commissioner of the Federal Housing Administration added, “More than a 100 million people were impacted by the blizzards that pounded the northeast earlier this year. It is hard to hold an open house with 2-3 feet of snow on the ground. "While the Dow Jones Industrial average, S&P index, and NASDAQ, have some very recent gains, the market had been mostly sluggish in January and February. Throw in a limited housing inventory, I am not surprised by the drop in existing sales, but a little surprised it was down 7.1 percent."
Existing-home sales do not appear to be slowing down home prices appreciation. According to the NAR, the median existing-home price in February was $210,800, up 4.4 percent from last February's median price of $201,900. This marks the 48th consecutive month of year-over-year gains.
"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers," Yun stated.
Housing inventory rose 3.3 percent to 1.88 million existing homes available for sale, but is still 1.1 percent lower than a year ago when inventory totaled 1.90 million. Inventory levels remain low at a 4.4-month supply, up slightly from 4.0 months in January.
"America is experiencing a housing shortage. Not only are there fewer homes available to buyers of all income levels, those just starting out or making their first foray into home ownership are worse off than they’ve been in years," said Ralph B. McLaughlin, Chief Economist at Trulia. "There are fewer homes available, an even if they can find a home, it’s likely to be more expensive."
First-time homebuyer activity appears to have slowed a bit, with the share falling to 30 percent in February, matching the lowest share since November 2015. This number is down 2 percentage points from 32 percent in January, but up from 29 percent a year ago.
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