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Residential real estate

Existing home sales fall three months in row

Paul Davidson
USA TODAY
A Realtor sign is shown in front of a home for sale in San Francisco in March 2014. San Francisco will now lend as much as $200,000 to some home buyers toward a down payment on their first house or condominium. Mayor Ed Lee's decision to double the previous limit of $100,000 was intended to help middle-class residents who have been hit hard by the housing crunch.

The housing market continued to sputter in March as adverse weather, low supplies and higher costs discouraged home buyers.

Existing home sales declined 0.2% to a seasonally adjusted annual rate of 4.59 million, the lowest level since July 2012, the National Association of Realtors said Tuesday. Home sales have fallen in seven of the past eight months.

Still, the market was a bit firmer than expected. Economists' median estimate was for an annual sales rate of 4.57 million, according to Action Economics' survey.

A brutal winter continued to play a role in the weak showing. Although March brought milder temperatures and fewer storms, sales activity largely reflected closings on purchase agreements signed in January and February, says Jim O'Sullivan, chief U.S. economist of High Frequency Economics.

Other factors are also holding down sales. The average 30-year fixed mortgage rate is at 4.27%, low by historical standards but up from about 3.4% a year ago. And higher home prices and a tight supply of homes for sale discouraged some buyers, NAR said.

There was a a 5.2-month supply of homes last month, up from a five-month supply in February, but six months is normal. Some of the tight inventory is welcome as the housing market recovers from the 2006 crash. Distressed homes, including foreclosures and short sales, accounted for 14% of sales in March, down from 21% a year ago.

But tight supplies limit selection and push up prices, crimping sales. The median price of a single-family home was $198,200 last month, up 7.4% from March 2013.

Another obstacle is that first-time buyers are making up an unusually low share of purchases — 30%, down from 40% traditionally — largely because of strict credit standards.

Some officials say brighter days are ahead. "There are indications that the stringent mortgage underwriting standards are beginning to ease a bit, particularly regarding credit score requirements," says NAR President Steve Brown, co-owner of Irongate Realtors in Dayton, Ohio.

Also, he says, brisk new-home construction will attract current homeowners, creating a bigger supply of existing homes for first-time buyers.

"We would expect existing home sales to pick up" as the impact of bad weather and higher mortgage rates fades, says Barclays Capital economist Cooper Howes.

Lawrence Yun, NAR's chief economist, says: "There really should be stronger levels of home sales given our population growth."

Last month, single-family home sales were unchanged. Existing condominium and co-op sales fell 1.8%.

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