Spike in home sales may not last
WASHINGTON — Slightly more Americans bought homes in February, but tight inventories, affordability problems and nasty winter weather point to sluggish sales in the next few months.
Sales of existing homes rose 1.2 percent last month to a seasonally adjusted annual rate of 4.88 million, a slight rebound after plunging in January, yet still underperforming by historical standards, the National Association of Realtors said Monday.
The real estate market has hibernated through the first two months of 2015, establishing the potential for a second straight year of weak buying activity.
Strong job growth and relatively low mortgage rates have failed to awaken buyers. Meanwhile, relatively few homes are being listed for sale, and builders are mostly catering to the wealthiest slivers of the market. Sales are running below last year's pace of 4.93 million, which represented a 3.1 percent drop from 2013.
“The next couple months are some of the most critical of the entire year for housing, and sluggish numbers may continue if inventory doesn't increase,” said Bill Banfield, vice president of mortgage provider Quicken Loans.
Despite the uptick in February, buying activity appears to have been slow entering into March because of a series of harsh winter storms. The weather last month shut down construction and hurt open houses, likely resulting in fewer signed contracts and putting additional downward pressure on completed sales in March.
“Mother Nature will probably make her presence known more in March,” said Jennifer Lee, a senior economist at BMO Capital Markets.
Housing starts plunged 17 percent in February, the Commerce Department reported last week. Buyer traffic also slipped last month, according to the National Association of Home Builders/Wells Fargo index. Mortgage applications slipped in March, according to the Mortgage Bankers Association.
Sales tumbled 6.5 percent last month in the Northeast, which was hammered hard by snow, the Realtors said. Homebuying was unchanged in the Midwest and increased in the South and West.
The recent storms have led several economists to expect a strong recovery in the spring, when more buyers usually step up their search and sellers decide to list their properties.
Still, some homeowners are trapped by mortgage debt, making it unprofitable for them to sell. Their negative equity is a lingering aftershock from the recession and housing bust, limiting the supply of available homes on the market.
The real estate data firm Zillow reported last week that 16.9 percent of home-owners owe more on their mortgage than their homes are worth. In several metro areas including Philadelphia, Houston and Boston, that rate actually increased from the levels in the third quarter of 2014.
The Realtors reported Monday that just 4.6 months of supply was listed for sale, compared to a full five months a year ago.
That meager inventory has helped push up sales prices, inciting affordability pressures despite strong monthly job gains averaging more than 200,000 for the past year.
Median home prices increased 7.5 percent over the past 12 months to $202,600, nearly quadruple the pace of average hourly wage gains.
Sales to investors and for all-cash have declined over the past year, while first-time buyers have yet to return. First-timers accounted for only 29 percent of home sales, compared to a historical average of 40 percent.
Nor have buyers responded much to the comparatively low mortgage rates.