After increasing to the highest annual rate in six months, existing-home sales in February dropped to a seasonally adjusted annual rate of 5.08 million, a decrease of 7.1% from 5.47 million in January, according to the National Association of Realtors (NAR).
Lawrence Yun, NAR’s chief economist, says existing sales disappointed in February and failed to keep pace with what had been a strong start to the year.
“Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” Yun says. “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. 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.”
Despite this large decline, sales are still 2.2% higher than a year ago.
According to Yun, job growth continues to hum along at a robust pace, but there appears to be some uneasiness among households that the economy is losing some steam.
“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,” says Yun.
The median existing-home price for all housing types in February was $210,800, up 4.4% from February 2015. February’s price increase marks the 48th consecutive month of year-over-year gains.
Total housing inventory at the end of February increased 3.3% to 1.88 million existing homes but is still 1.1% lower than a year ago. Unsold inventory is at a 4.4-month supply at the current sales pace – up from 4.0 months in January.
First-time buyers fell to 30% in February from 32% in January – but the share is up from 29% a year ago. First-time buyers in all of 2015 represented an average of 30%.
About 25% of all transactions in February were all-cash sales – down from 26% both in January and a year ago. Individual investors purchased 18% of homes in February, matching the highest share since April 2014. Sixty-four percent of investors paid cash in February.
“Investor sales have trended surprisingly higher in recent months after falling to as low as 12 percent of sales in August 2015,” adds Yun. “Now that there are fewer distressed homes available, it appears there’s been a shift towards investors purchasing lower-priced homes and turning them into rentals. Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.”
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