The fragile real estate market isn’t showing signs of recovery just yet. Residential property prices and sales in the US continue to decline. Figures from the National Association of Realtors show distressed sales are still climbing. Learn more about this in the full article from PropertyWire.
Residential property sales and prices are continuing to fall in the US with few signs of the fragile real estate market making a recovery yet.
Existing homes sales fell 9.6% in February faced with an increasing number of contract cancellations. Cash sales hit a record high and distressed sales continued to climb, the figures from the National Association of Realtors show.
The organisations said that said seasonally adjusted sales of existing homes decreased to 4.88 million in February from 5.4 million in January. It means the figures are now 2.8% below what they were last February.
‘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,’ NAR chief economist Lawrence Yun said.
But he believes there are signs of recovery. ‘This tug and pull is causing a gradual but uneven recovery. Existing home sales remain 26.4% above the cyclical low last July,’ he explained.
NAR said all cash sales accounted for a third of all sales in February, which is the highest level recorded and up from 32% in January and 27% a year earlier. Investor activity in February remained flat with a year earlier at 19% but fell from 23% in January.
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The median existing home price fell 5.2% from a year ago to $156,000, according to NAR, and homes sold at a discount accounted for 39% of all sales. Distressed sales rose from 37% in January and 35% a year earlier.
‘The decline in price corresponds to the record level of all cash purchases where buyers, largely investors, are snapping up homes at bargain prices. We’d be seeing greater numbers of traditional home buyers if mortgage credit conditions return to normal,’ Yun added.
While in a separate report the US Commerce Department revealed that sales of new homes sank to a record low in February and prices were the weakest in just over seven years, underscoring the housing market’s lingering malaise.
Sales of new single family homes dropped 16.9% to a seasonally adjusted 250,000 unit annual rate, the lowest since records began in 1963, after a 301,000 unit pace in January.
Despite the surprise plunge in sales, economists did not believe a new downturn in the housing market was under way, with some suggesting bad weather might have been a factor.
‘We do not believe the housing sector is on the verge of renewed contraction. Rather, we continue to expect the recovery in housing to be disappointingly and frustratingly slow,’ said Michelle Girard, an economist at RBS in Stamford, Connecticut.
An oversupply of homes exacerbated by an increasing flood of properties falling into foreclosure is frustrating recovery in the housing market. The housing market has remained on the periphery of the broader economy’s expansion.
However, residential construction has declined to about 2.3% of gross domestic product from a peak of about 6% in 2005, so analysts do not see the sustained weakness in housing derailing the economic recovery.
But it has the potential to slow growth as plummeting home values erode consumer confidence and hurt spending at a time when there are signs the economy is picking up.
However, analysts are optimistic home sales will pick up from their current depressed levels in the spring, but caution persistent declines in house prices could hold back recovery.
‘The decline in the home prices is a function of the imbalance in the housing market, where there is a particular concentration of distressed properties in the market,’ said Michelle Meyer, an economist at Bank of America Merrill Lynch in New York.
This article was republished with permission from PropertyWire.