WASHINGTON — After increasing to the highest annual rate in six months, existing-home sales tumbled in February amidst unshakably low supply levels and steadfast price growth in several sections of the country, according to the National Association of Realtors®. Led by the Northeast and Midwest, all four major regions experienced sales declines in February.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1% to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month’s large decline, sales are still 2.2 percent higher than a year ago.
Sales Fizzle in February
Lawrence Yun, NAR 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,” he said. “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.”
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. This was evident in NAR’s latest quarterly HOME survey – released earlier this month – which revealed that fewer respondents believe the economy is improving, and a smaller share of renters said that now is a good time to buy a home2.
“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 price3 for all housing types in February was $210,800, up 4.4% from February 2015 ($201,900). February’s price increase marks the 48th consecutive month of year-over-year gains.
Total housing inventory4 at the end of February increased 3.3% to 1.88 million existing homes available for sale, but is still 1.1% lower than a year ago (1.90 million). Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.0 months in January.
All-cash sales were 25% of transactions in February, down from 26% both in January and a year ago. Individual investors, who account for many cash sales, purchased 18% of homes in February (17 percent in January), matching the highest share since April 2014. 64% of investors paid cash in February.
“Investor sales have trended surprisingly higher in recent months after falling to as low as 12%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.”
The share of first-time buyers fell to 30% in February (matching the lowest share since November 2015) from 32% in January, but is up from 29% a year ago. First-time buyers in all of 2015 represented an average of 30%.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage declined from 3.87% in January to 3.66% in February, which is the lowest since April 2015 at 3.67%. The average commitment rate for all of 2015 was 3.85%.
Properties typically stayed on the market for 59 days in February, a decrease from 64 days in January and below the 62 days in February 2015. Short sales were on the market the longest at a median of 126 days in February, while foreclosures and non-distressed homes each took 57 days. 35% of homes sold in February were on the market for less than a month.