The Home Buyer's Korner

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March 25th, 2015

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Existing Home Sales for February

Homes Sales

Existing home sale improved slightly in February, but a shortage of available properties on the market could undermine the spring selling season. Tight inventories are hurting sales by boosting home prices and limiting the selection of houses available to would-be home buyers. Typically home buyers look at 10 to 15 houses before making a purchase and that’s getting harder to do with the low inventory. In February, the inventory of unsold homes on the market rose 1.6 percent to 1.89 million units, but supply was down 0.5 percent from a year ago.

Inventory growth should be averaging roughly 5.6 percent this time of the year, when the market gets ready for the spring selling season, which runs from April through August and is traditionally the busiest time of the year for housing.

Slow home sales are just another sign that economic activity slowed sharply in the first quarter, which could further lower expectations that the Federal Reserve will increase interest rates in June. The Fed in its latest meeting pointed to housing as a sector that remains. The National Association of Realtors said on Monday that existing home sales rose 1.2 percent to an annual rate of 4.88 million units, which is a doubling down on January’s 4.9 percent plunge. Housing economists had forecast home resale’s rising to a 4.90 million-unit pace last month.

The median price for a previously owned home was 7.5 percent higher from a year ago. That was the largest percentage gain since February 2014 and suggested that the pace of home price increases, which had been slowing after double-digit growth for much of 2013, appears to be reaccelerating. That’s beginning to  sideline first-time buyers.

First-time buyers accounted for 29 percent of transactions last month, well below the 40 percent to 45 percent share that housing economists and realtors point to as a signal for a strong housing recovery.

At February’s sales pace, it would take 4.6 months to clear houses from the market, unchanged for a second straight month. A supply of six months is viewed as a healthy balance between supply and demand.

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