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February Existing Home Sales Dip To Lowest Level Since July 2012, Says NAR

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Existing home sales fell 0.4% in February, reaching their lowest sales pace since July 2012, according to data released Thursday by the National Association of Realtors. The drop comes amid an unusually cold winter, and as home prices continue to rise.

In February, sales of existing (or previously-owned) homes fell to an annualized rate of 4.6 million (seasonally adjusted), down just slightly from the 4.62 million rate in January, and 7.1% below the pace one year earlier. Sales have not been slower since July 2012, when the annualized rate (seasonally adjusted) stood at 4.59 million.

February's conditions echo January, when cold weather, rising home prices and mortgage rates, and low inventory were blamed for a slip in sales pace. “We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” noted Lawrence Yun, NAR chief economist, of February's data. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

NAR’s Existing home sales data tallies of the number of sales of previously-owned single-family homes, townhomes, condominiums and co-ops that close during a given month. Since resales account for a greater share of the housing market than new homes, the measure is considered a market bellwether.

Thursday's data shows that prices are continuing to rise. The median existing-home price for all housing types in February was $189,000, 9.1% higher than in February 2013. For single-family homes, the median price was $189,200; for condos, $187,900. Mortgage rates (30-year, conventional, fixed-rate) dropped in February to 4.3% (down from 4.43% in January), but are still quite a bit higher than the 3.53% rate in February 2013, according to Freddie Mac.

In contrast to past months, inventory actually rose 6.4% at the end of February to 2 million existing homes available for sale, about a 5.2-month supply at the current sales pace. (A 6-month supply is considered a healthy market.) Although that's still lower than ideal levels, it is an improvement from January, when the inventory level stood at a 4.9-month supply.

Thursday's data also shows that home ownership continues to be a problem for would-be first-time buyers, many of whom are laden with student debt. In January, NAR noted that the first-time buyers comprised just 26% of existing-home purchases, the lowest market share for this group since NAR began tracking the measure in October 2008. Normally, they should be close to 40% of the overall market. However, the situation improved in February, with first-time buyers accounting for 28% of purchases in February, according to Freddie Mac.

“The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” said NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a down payment identified student debt as the biggest obstacle.”

In the West and the South, the pace of existing-home sales rose in February from the prior month. However year-over-year, all regions are seeing slower existing-sales. In the Northeast, sales slowed by 11.3% in February to an annual rate of 550,000, which is 12.7% below the rate in February 2013. In the Midwest, the sales rate declined 3.8% in February to a pace of 1 million, 12.3% below one year ago. The South is faring best of all the regions, with existing-home sales up 1.5% in February to annual level of 1.98 million, just 0.5% below its February 2013 pace. Existing-home sales also rose in the West in February (by 5.9% to a pace of 1.07 million), but that level is 10.1% below a year ago.

Across regions, median sales prices are up: in the Northeast to $237,800, up 1.5% from a year ago; in the Midwest to $140,900, 8.6% higher than February 2013; in the South to $163,400, up 8.3% from a year ago; and in the West $279,400, up 18% from February 2013.

Sales of distressed homes are slightly up, at 16% of total existing-home sales, with 11% foreclosures and 5% short sales. That's slightly up compared to January's 15% of the sale pie, but still much lower than on year earlier, when distressed home sales accounted for one-quarter of the existing-sales market. All-cash sales comprised 35% of transactions in February, up from 33% in January and 32% in February 2013.