 | Existing Home Sales Rose 0.8% in February to an Annual Rate of 4.98 Million Units |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: Existing home sales rose slightly in February coming in at the highest sales pace since November 2009, when sales were artificially boosted by an $8,000 homebuyer tax credit. Sales are up 10.2% from a year ago. Although the inventory of existing homes rose for the first time in six months, they are still down 19.2% from a year ago. Because of the increase in inventories, the months' supply of homes (how long it would take to sell the entire inventory at the current selling rate) rose to 4.7. Some of the increase in inventories is probably due to higher prices getting fence-sitting potential sellers into the market. Regardless, this is not a sign of trouble. Just a year ago, the months' supply was 6.4. The 11.6% gain in median prices versus a year ago can be attributed to a couple of factors. First, lower inventories while demand is picking up. Second, fewer distressed sales and more sales of larger homes. This can be seen in the sales data as homes priced from $0-$100,000 were down 12.8% from a year ago while those $1,000,000+ are up 27.4%. In general, it still remains tougher than normal to buy a home. Despite record low mortgage rates, home buyers face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 32% of purchases in February versus a traditional share of about 10%. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it's a great time to buy. In other housing news today, the FHFA index, which measures prices for homes financed by conforming mortgages, increased 0.6% in January (seasonally-adjusted), and is up 6.5% from a year ago. In other news this morning, initial claims for unemployment insurance rose 2,000 last week to 336,000. The four-week moving average of claims is now 340,000. Continuing claims for regular state benefits increased 5,000 to 3.05 million. These figures are consistent with more solid job growth in March. On the manufacturing front, the Philly Fed index, a measure of activity in that region, rose to +2.0 in March from -12.5 in February. Regional manufacturing surveys have been coming in better so far in March and we anticipate an increase in the national ISM index for the month.
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