The National Association of Realtors reported that existing-home sales dropped 9.6% in February. This was much worse than projected numbers and points to an unbalanced U.S. housing market recovery. Learn more by reading this full article by The Street.
Existing-home sales dropped 9.6% in February to a far worse-than-expected seasonally adjusted annual rate of 4.88 million units, the National Association of Realtors said Monday morning, pointing to a choppy, uneven recovery in the U.S. housing market.
Economists’ consensus call had been for the figure to come in at 5.05 million units, according to estimates listed on Briefing.com, compared with an upwardly revised rate of 5.4 million units sold in January. February’s rate remained 24.8% below the cyclical peak of 6.49 million units in Nov. 2009, which was the initial deadline for the first-time homebuyer tax credit, and 2.8% below the home resale rate in February of 2010.
"Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers," said Lawrence Yun, NAR’s chief economist.
"This tug and pull is causing a gradual but uneven recovery," he added. "Existing-home sales remain 26.4% above the cyclical low last July."
An NAR practitioner survey showed that first-time builders accounted for 34% of home purchases in February, up from 29% in January but lower than the 42% share in the year-earlier month.
The national median existing-home price for all housing types was $156,100 in February, down 5.2% year-over-year.
All-cash sales were a record 33% last month, the NAR said, up from 32% a month earlier and 27% a year earlier. Investors accounted for 19% of sales activity in February, down from 23% in January and flat year-over-year.
"The decline in price corresponds to the record level of all-cash purchases where buyers — largely investors — are snapping up homes at bargain prices," Yun explained. "We’d be seeing greater numbers of traditional home buyers if mortgage credit conditions return to normal."
Distressed homes — which are sold at a discount — accounted for 39% of all existing-home sales last month, up from a 37% share in January and 35% a year ago.
Total housing inventory at the end of December rose 3.5% to 3.49 million existing homes available for sale. That represents an 8.6-month supply at the current sales pace, up from a 7.5-month supply in January.
The housing sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.
The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones U.S. Home Construction (ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.
Much of the sector dipped into negative territory Monday morning following the disappointing existing-home sales report, but the sector recovered its losses and headed into the closing bell with comfortable gains, riding a broader market rally.
Among individual builders, D.R. Horton (DHI) gained 1.3%, Lennar (LEN) 0.8%, PulteGroup (PHM) 1.1% and Toll Brothers (TOL) 1.4%.
Small-cap builder KB Home (KBH), due to report its quarterly earnings on Wednesday, rose 2.2% Monday afternoon. Analysts expect the builder to book a loss of 27 cents per share, or $19.6 million, on revenue of $224.2 million.
This article was republished with permission from The Street.