February Existing Home Sales

The National Association of Realtors (NAR) released February’s existing home sales report, and it was not encouraging. The annualized rate of sales fell 9.6 percent to 4.88 million units after January’s figure was revised up slightly to 5.4 million from an initial reading of 5.36 million dwellings.

The country’s inventory was getting closer to a healthy six month supply in January as the stock of homes was at 7.5 months.  February saw a move in the wrong direction.  The nation now has 3.49 million homes for sale (up from 3.38 million in January) which equates to 8.6 months worth of abodes at its current sales pace.  The median price for homes fell 5.2 percent year-over-year to $156,100.  Distressed homes, those sold in foreclosure or in a short sale, accounted for 39 percent of the existing home sales.

While 30-year fixed mortgage rates remain reasonable, they did increase a little to 4.95 percent from 4.76 percent in January. Low rates and the ability to procure a loan are not working in tandem.  The president of NAR Ron Phipps in quoted as saying, “Despite very affordable mortgage interest rates, credit remains a challenge.”   The difficulty finding financing may become greater as the primary guarantor of mortgages, FHA, takes steps to reduce its pledging role in the mortgage market. They are currently insuring about one-third of new mortgages up from a 4 percent role at the peak of the housing boom and the longer-term average of 10-15 percent according to the February 16, 2011 testimony of David H. Stevens, Assistant Secretary of Housing, to the House financial subcommittee on insurance, housing, and community. This segment of our economy continues to be in poor shape.  The indicator is currently at the worst position, 6 o’clock, and is likely to remain there for the foreseeable future.