The sales pace of existing homes ticked down in March to the slowest rate since July 2012, showing weakness in the early spring sales season, though underlying trends signal a firming in market fundamentals, economists said Tuesday.
The National Association of Realtors reported that the annual sales pace of existing homes declined 0.2% last month to a seasonally adjusted annual 4.59 million. But March’s result beat a consensus among economists polled by MarketWatch, who had expected a sales rate of 4.55 million, compared with a pace of 4.6 million in February.
For context, there was an average monthly sales pace of more than 6 million existing homes over the five years leading up to a 2005 bubble peak.
Sales rates have trended down since the summer on falling affordability as inventory remained low, and there’s been concern about tepid spring-sales results. Some buyers have been put off by rapidly rising prices. According to NAR, the median sales price of used homes hit $198,500 in March, up 7.9% from the year-earlier period. Elsewhere Tuesday, a federal housing regulator reported that home prices in February were up almost 7% from the year-earlier period.
Unusually rough weather in recent months likely also curbed some demand, though regional sales results for March show gains in the Northeast and Midwest, according to NAR. New mortgage rules for borrowers and lenders are likely also curbing some deals, analysts say.
“At least part of the net weakening likely reflects weather effects, although, even without weather effects, sales have clearly slowed since early last year,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note.
In addition, banks have high hurdles for borrowers to obtain a mortgage, conditions that are particularly tough for would-be first-time buyers and younger families. Some economists worry that as institutional investors scale back their purchases, with foreclosures and ultra-cheap deals thinning out, first-time buyers won’t fill the gap .
Over the last several business days, economists at both Fannie Mae and Freddie Mac, the federally controlled mortgage-finance giants, cut their forecasts for the housing market’s performance in 2014. Fannie reduced its outlook for new-home construction, while Freddie lowered its view for home sales.
Despite home-sales weakness in the first quarter of this year, economists don’t think 2014 will be a wipeout.
“Although the string of negative readings suggests the recovery has stalled, the underlying details are more supportive,” Wells Fargo Securities economists wrote in a research note.
“Negative housing momentum, which was exacerbated by severe weather conditions during the winter months, may be starting to fade…We expect positive underlying fundamentals to begin reasserting themselves, helping to drive a rebound in housing market activity over the coming months,” Gennadiy Goldberg, U.S. strategist at TD Securities, wrote in a research note.
First-time buyers’ share of existing-home sales rose to 30% last month, up from 28% in February. The long-term average is closer to 40%.
Distressed properties’ share of existing-home sales fell to 14% in March from 16% in February.