Highlights
*Sales of existing homes rose 3.7% in March.
*Existing home sales are now 6.3% below their level one year ago.
*The median existing home price increased 2.2% in March, to $159,600, but remains 5.9% below the March 2010 level.
*The inventory of unsold housing dipped to 8.5 months (from 8.6) at the current sale pace.
*Distressed sales accounted for 40% of transactions in March.
*Housing starts fell 11.2% to an annual rate of 479,000 units.
*The average 30-year mortgage rate was 4.80% as of April 21.
U.S. sales of existing homes increased 3.7% in March to a seasonally adjusted annual rate of 5.1 million units, the National Association of Realtors reported on April 20. This gain follows a significant decline of 8.9% in February and three straight monthly increases: 3.4% in January, 12.5% in December, and 5.9% in November. Existing home sales are currently 6.3% below their level a year ago. They have increased in six of the past eight months, which highlights the slow recovery in sales and the housing sector. The median U.S. home price increased 2.2% in March – to $159,600 – but remains 5.9% below the March 2010 level.
Prices increased in all four U.S. regions, and existing sales increased in every region except the West. Sales in the South increased the most (8.2%) in March and were 1% below March 2010 levels. Existing sales in the Northeast increased 3.9%, but declined 12.1% year over year. Existing sales in the Midwest increased 1% in March, but declined 13.1% from a year ago. In the West, sales declined 0.8% and were down 3.1% year over year.
In March, distressed sales increased to 40% of total sales, from 39% in February and 35% in March 2010.
Pending home sales were down in December and January, but showed a modest increase in February. Pending sales usually lead existing home sales by one to two months. As a result, April’s existing home sales may show signs of improvement. (Data for April will be released on May 19.) March’s official inventory was 3.55 million homes, up 1.5% from February. The months supply declined to 8.4 months in March from 8.5 months in February at the current sale pace. This does not include the unofficial shadow inventory, which remains the key concern for the housing market recovery in addition to the high unemployment rate.
Single-Family House Prices Down
On April 21, the Federal Housing Finance Agency (FHFA) reported that its House Price Index dropped another 1.6% in February from a downwardly revised January, and is now down 18.6% from its April 2007 peak. The FHFA index tracks the prices of single-family houses. It typically drops about half as much as the S&P/Case-Shiller index, which is scheduled for release April 26. Prices are now down 5.7% from a year ago, with the largest decline (11.8%) in the Mountain states and the smallest in the East South Central region (2.9%), closely followed by New England and the West North Central, both down 3.3%. Prices have now dropped for four consecutive months. Mortgage Rates Dip Mortgage rates rose through the early weeks of April, before falling for the first time in more than a month. As of April 21, the average rate on 30-year fixed-rate mortgages was 4.8%, according to Freddie Mac’s weekly survey of mortgage rates.
Housing Starts Improve
Housing starts rebounded 11.2% in March to an annual rate of 594,000, according to Census Bureau data. The previous two months were revised significantly higher, with February now at 512,000 rather than the 479,000 reported last month. The data indicate that the winter swings were caused by a combination of distortions created by rebates, changes in building codes, and weather. With all of these stabilizing, it now seems clearer that housing starts are also stabilizing – albeit at very low levels.
Housing starts were up in all regions except the South (down 3.3%), with the biggest increases in the West (up 27.6%) and Midwest (up 32.3%). The increase was spread between single-family and multifamily construction, with single-family starts up 7.2% and multifamily up 14.7%. Multifamily starts are up 28.6% from a year ago, but single-family starts remain down 13.4%. Single-family starts were more affected by the rebate programs.
Home Ownership Seen as Best Investment
Despite the prolonged housing market slump, 81% of recently surveyed Americans believe that purchasing a home is still the best long-term investment a person can make, according to the Pew Research Center. This year, 37% said they “strongly agree” with that statement, while 44% “somewhat agree.” In 1991, 49% strongly agreed and 35% somewhat agreed. Nearly half (47%) said their homes are now worth less than at the beginning of the recession, while 31% said the value is the same and 17% said the value has increased. Most respondents don’t expect home values to recover for several years: 44% expect a price recovery in three to five years, while 32% predict it will take 6 to 10 years.
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