Homebuyers overcame one of the housing market's biggest obstacles—an imbalance in supply and demand— in March with a rebound in home sales.
The National Association of Realtors  (NAR) reported Wednesday that existing-home sales rose 5.1 percent to a seasonally adjusted annual rate of 5.33 million in March from a downwardly revised 5.07 million in February and 1.5 percent year-over-year.
"Closings came back in force last month as a greater number of buyers – mostly in the Northeast and Midwest–overcame depressed inventory levels and steady price growth to close on a home," said Lawrence Yun, NAR Chief Economist. "Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures."
Existing-home sales suffered in February due to the continuous imbalance of extremely low inventory levels and rapid home price appreciation. The NAR reported that existing-home sales fell in February 2016 after reaching the highest annual rate in six months last month.
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.
"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," Yun explained. "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."
According to NAR, the median existing-home price for all housing types in March was $222,700, up 5.7 percent from $210,700 in March 2015. This marks the 49th consecutive month of year-over-year gains.
Inventory rose 5.9 percent to 1.98 million existing homes available for sale in March, but is still 1.5 percent lower than a year ago when inventory stood at 2.01 million, the report showed. Unsold inventory is at a 4.5-month supply at the current sales pace, up from 4.4 months in February.
"The choppiness in sales activity so far this year is directly related to the unevenness in the rate of new listings coming onto the market to replace what is, for the most part, being sold rather quickly," Yun noted. "Additionally, a segment of would-be buyers at the upper end of the market appear to have been spooked by January's stock market correction."
Despite the uptick in existing-home sales, the share of first-time buyers was unchanged from February and a year ago at 30 percent, according to NAR.
"With rents steadily rising and average fixed rates well below 4 percent, qualified first-time buyers should be more active participants than what they are right now," Yun stated. "Unfortunately, the same underlying deterrents impacting their ability to buy haven't subsided so far in 2016. Affordability and the low availability of starter homes is still a major barrier for them in most markets."