Inventory Hampering Home Sales and Pushing Prices Higher
Short supplies of existing home inventory continued to hold back sales in February the National Association of Realtors® (NAR) said today, but contributed to the fastest annual gain in home prices in a year. Weather was also a factor, with lackluster sales in the snow-plagued Northeast offsetting gains in Sunbelt states.
Nationwide sales of existing single-family homes, townhomes, condominiums, and co-ops rose 1.2 percent to a seasonally adjusted annual rate of 4.88 million in February from 4.82 million in January. Sales were 4.7 percent higher than in February 2014, the fifth consecutive month that year-over-year sales increased.
Single-family home sales increased 1.4 percent, from a seasonally adjusted rate of 4.28 million in January to 4.34 million. This was 5.9 percent higher than the 4.10 million pace a year earlier. Condo and co-op sales were unchanged from January at a rate of 540,000 units and down 3.6 percent from existing unit sales in February 2014.
The median price of existing-homes overall in February was $202,600, which is 7.5 percent above February 2014. It was the 36th consecutive month of year-over-year price increases and the largest gain since an 8.8 percent jump last February. The median price of a single family home was up 8.1 percent from a year earlier to $204,200 and the median price of an existing condos was $190.200, a 2.8 percent annual increase.
Inventory, while up slightly in February, remains 0.5 percent below levels one year ago. At the end of February there were an estimated 1.89 million homes available for sale compared to 1.90 million a year earlier. This, however, was an increase of 1.6 percent from January although the unsold inventory remained at a 4.6 month supply given the slightly increased rate of sales.
Lawrence Yun. NAR chief economist, said sales, though up modestly in February, have stagnated somewhat in recent months. "Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels," he said. "Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise."
A NAR study released in March found that the disparity between rent and income growth is widening in metro areas throughout the country and is making it harder for renters to become homeowners. "With all indications pointing to a rate increase from the Federal Reserve this year - perhaps as early as this summer - affordability concerns could heighten as home prices and rents both continue to exceed wages," Yun said.
The percent share of first-time buyers was 29 percent in February, up from 28 percent in January and the first increase since last November. Individual investors purchased 14 percent of homes, down from 17 percent in January and 67 percent paid cash for their home purchases. Cash sales overall accounted for 26 percent of transactions, down 1 percentage point from January but significantly lower than the 35 percent of cash sales in February 2014.
Eight percent of February's sales were foreclosures and 3 percent were short sales with the total of distressed sales unchanged at 11 percent for the third straight month. Foreclosures sold for an average discount of 17 percent below market value in February (15 percent in January), while short sales were discounted 15 percent (12 percent in January).
"Investor sales are trending downward due to the continued rise in prices and fewer bargains available from distressed properties coming onto the market," says NAR President Chris Polychron. "Furthermore, Realtors® in areas popular to foreign buyers, such as South Florida and the West Coast, are reporting tempered demand from international clients - who typically pay in cash - due to the strengthening U.S. dollar compared to foreign currencies."
The typical marketing period for properties in February was 62 days, down from 69 in January. Short sales were on the market the longest at a median of 120 days, foreclosures sold in 58 days and non-distressed homes took 61 days. Thirty-four percent of homes sold in February were on the market for less than a month.
February existing-home sales in the Northeast dropped 6.5 percent to an annual rate of 580,000, but are still 3.6 percent above a year ago. The median price in the Northeast rose 3.3 percent from a year earlier to $241,800.
Sales were at an annual level of 1.08 million in the Midwest, unchanged from January and 4.9 percent above February 2014. The median price in the Midwest was $152,900, up 8.8 percent from a year ago.
Yun noted that "Severe below-freezing winter weather likely had an impact on sales as more moderate activity was observed in the Northeast and Midwest compared to other regions of the country."
Sales were up 1.9 percent in the South to an annual rate of 2.11 million units, 6.0 percent higher than the previous February while prices rose 8.5 percent to a median of $177,900.
The West had an increase in sales of 5.7 percent to a rate of 1.11 million, 2.8 percent higher than a year ago. The median price in the West was $290,100, a 4.2 percent annual gain.