Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the National Association of Realtors®.
Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010.
Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.
“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.
“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.
A parallel NAR practitioner survey2 shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent of homes in February; they were 44 percent in March 2010.
All-cash sales were at a record market share of 35 percent in March, up from 33 percent in February; they were 27 percent in March 2010. Investors accounted for 22 percent of sales activity in March, up from 19 percent in February; they were 19 percent in March 2010. The balance of sales were to repeat buyers.
The national median existing-home price3 for all housing types was $159,600 in March, down 5.9 percent from March 2010. Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said some renters are looking to home ownership as a hedge against inflation. “The typical buyer today plans to stay in a home for 10 years, while rents are projected to rise at faster rates over the next few years,” he said. “As buyers gain more financial security, the advantages of home ownership become more obvious. Rents will continue to trend up, especially in comparison with a fixed-rate loan which provides financial stability and gradual accumulation of equity over time.”
Total housing inventory at the end of March rose 1.5 percent to 3.55 million existing homes available for sale, which represents an 8.4-month supply4 at the current sales pace, compared with a 8.5-month supply in February.
Single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago.
Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 650,000 in March from 640,000 in February, but are 4.1 percent below the 678,000-unit pace one year ago. The median existing condo price5 was $153,100 in March, which is 10.1 percent below March 2010.
Regionally, existing-home sales in the Northeast rose 3.9 percent to an annual level of 800,000 in March but are 12.1 percent below March 2010. The median price in the Northeast was $232,900, down 3.0 percent from a year ago.
Existing-home sales in the Midwest increased 1.0 percent in March to a pace of 1.06 million but are 13.1 percent lower than a year ago. The median price in the Midwest was $126,100, which is 7.1 percent below March 2010.
In the South, existing-home sales rose 8.2 percent to an annual level of 1.99 million in March but are 1.0 percent below March 2010. The median price in the South was $138,200, down 6.6 percent from a year ago.
Existing-home sales in the West slipped 0.8 percent to an annual pace of 1.25 million in March and are 3.1 percent below a year ago. The median price in the West was $192,100, which is 11.2 percent lower than March 2010.