Anyone question whether the housing market is actually in recovery may want to look at the latest existing home sales data for February. The National Association of Realtors (NAR) reports that existing -homes sales increase 0.8% compared to January. The increase represents a seasonally adjusted annual rate of 4.98 million units.
This volume of sales is also 10.2% higher than the 4.52 million unit rate reached in February 2012. NAR revised the January annual rate up to 4.94 million units.
For 20 straight months, sales have exceeded year-to-year levels. February sales registered the highest volume for existing homes since November 2009 when the first time home buyer tax credit was in effect.
Existing-home sales consist of transactions that actually closed and transferred title to single-family homes, townhomes, condominiums and co-ops.
Dynamics At Play
The NAR’s chief economist Lawrence Yun believes several factors are fueling “continued housing improvement” including a strengthening housing market, an improving economy that is adding jobs and the blooming demand for housing.
These elements have lead to a seller’s market in many areas, home price appreciation and rising rental prices.
According to Yun, home prices are “rising much faster than rents, historically low mortgage rates are still making home purchases affordable." He points to the inventory shortage and mortgage lenders’ tight credit criteria as too “restrictive” and obstacles to taking the market higher.
Home Inventory and Median Price
The NAR also reports that the total housing inventory increase 9.6% to 1.94 million existing homes available for sale in February. This equates to a 4.7 month supply compared to 4.3-month supply in January. The January figure represents the lowest inventory level since May 2005. Compared to the same period last year when the available supply was 6.4 months, the listed inventory is 19.2% lower.
In February, the national median existing home price for all housing categories rose to $173,600, an 11.6% hike over February last year. The year-over-year increase represents the strongest monthly gain since November 2005 when housing prices rose 12.9% compared to the previous year. This is the first time there have been12 straight months of year-over-year price increases since the period of June 2005 to May 2006.
Yun states that homeowners have gained $1.4 trillion in home equity over the past year because of “a strong rise in home values.” Furthermore, “the extra consumer spending arising from growth in housing wealth is expected to be $70 billion to $110 billion this year," said Yun.
Foreclosures and Short Sales
Foreclosures and short sales increased to 25% of total existing home sales in February compared to 23% in January. However, the figure is down from February 2012 when distressed home sales equal 34% of all existing home sales.
Foreclosures made up 15% of February sales and short sales 10%. The average foreclosed home sold for a discount of 18% below market rate home. The average discount for short sale transactions was 15%.
Based on Freddie Mac’s weekly mortgage survey, the average interest rate for a 30-year conventional fixed rate home mortgage increased to 3.53% in February—up from 3.41% the prior month. Last year, the national average rate for the product was 3.89%.
Putting the historically low mortgage interest rates into perspective, the president of NAR Gary Thomas said that the past15 months represents the only time "In the history of mortgage interest rates since 1971, the 30-year fixed rate has been below 4 percent.”