Existing home sales March 2014 dwindled slightly and home price appreciation moderated, while sales gains in the Northeast and Midwest were offset by declines in the West and South according to the National Association of Realtors.
Total existing home sales, which are home purchase transactions that are closed or completed, including single family homes, townhomes, condominiums and co-ops, fell 0.2 percent to a seasonally adjusted annual rate of 4.59 million homes in March. Existing home sales March 2014 declined slightly from the 4.60 million existing home sales closed in February. Existing home sales March 2014 declined a more substantial 7.5 percent from the 4.96 million sales pace set in March 2013. The pace of existing home sales in March is the slowest month of existing home sales since July 2012, when sales were also 4.59 million homes.
Existing Homes Sales Under-Performing
Lawrence Yun, chief economist for the National Association of Realtors (NAR), said current sales activity is under-performing by historical standards. “There really should be stronger levels of home sales given our population growth,” he said. “In contrast, price growth is rising faster than historical norms because of inventory shortages.” Yun indicated that he expects improvement in the months ahead. “With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly.”
The median existing-home price for all housing types, which includes single-family homes, condominiums, townhomes and co-ops in March was $198,500, up 7.9 percent from March 2013. Distressed home sales, including foreclosures and short sales, accounted for 14 percent of March sales, down from 16 percent in February and 21 percent in March 2013. “With rising home equity, we expect distressed homes to decline to a single-digit market share later this year,” Yun said.
Opportunities For Distressed Sales Dwindling
Ten percent of existing home sales March 2014 were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in March, while short sales were discounted 12 percent. Opportunities to purchase foreclosed and short-sale homes at severe discounts are dwindling.
The total inventory of homes on the market at the end of March rose 4.7 percent to 1.99 million existing homes available for sale. This represents a 5.2-month supply at the current rate of sales, which is a slight increase from the 5.0 month supply at the end of February. Unsold inventory is 3.1 percent higher than a year ago, when there was a 4.7-month supply.
The median time that homes were on the market before selling was 55 days in March, down from 62 days it took to sell in February, and down from the 62 days it took to sell in March 2013. Short sales were on the market for a median of 112 days in March, while foreclosures typically sold in 55 days and non-distressed homes took 53 days. Thirty-seven percent of homes sold in March were on the market for less than a month.
Interest Rates Remain Low By Historical Standards
According to Freddie Mac, the Federal Home Loan Mortgage Corporation, the national average interest rate for a 30-year, conventional, fixed-rate mortgage rose to 4.34 percent in March from 4.30 percent in February; and was significantly higher than the 3.57 percent in March 2013. Interest rates are still extremely low by historical norms.
First-time buyers accounted for 30 percent of purchases in March, up from 28 percent in February. The percentage of first-time buyers was unchanged from March 2013.
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said first-time buyers have been stuck in a rut. “There are indications that the stringent mortgage underwriting standards are beginning to ease a bit, particularly regarding credit score requirements, but they remain a headwind for entry-level and single-income home buyers,” he said.
“We also have tight inventory in the lower price ranges where many starter homes are found, but rising new-home construction means some owners will be trading up and more existing homes will be added to the inventory. Hopefully, this will create more opportunities for first-time buyers,” Brown said.
All-cash sales which were 33 percent of transactions in March, was down slightly when compared with 35 percent in February, but were up slightly from 30 percent in March 2013. Individual investors, who account for many cash sales, purchased 17 percent of homes in March, down from 21 percent in February and 19 percent in March 2013. Seventy-one percent of investors paid cash in March.
Existing Home Sales March 2014 By Property Type And Region
Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.04 million in March, the same as February, but are 7.3 percent below the 4.36 million pace a year ago. The median existing single-family home price was $198,200 in March, which is 7.4 percent above March 2013.
Existing condominium and co-op sales declined 1.8 percent to an annual rate of 550,000 units in March from 560,000 in February, and are 8.3 percent below the 600,000 level in March 2013. The median existing condo price was $200,800 in March, up 11.6 percent from a year ago.
Regionally, existing-home sales in the Northeast rose 9.1 percent to an annual rate of 600,000 in March, but are 4.8 percent below March 2013. The median price in the Northeast was $244,700, up 3.2 percent from a year ago.
Existing-home sales in the Midwest rose 4.0 percent in March to a pace of 1.04 million, but are 10.3 percent below a year ago. The median price in the Midwest was $149,600, which is 5.9 percent above March 2013.
In the South, existing-home sales declined 3.0 percent to an annual level of 1.92 million in March, and also are 3.0 percent below March 2013. The median price in the South was $173,000, up 6.7 percent from a year ago.
Existing-home sales in the West fell 3.7 percent to a pace of 1.03 million in March, and are 13.4 percent below a year ago. The median price in the West was $289,300, which is 12.6 percent higher than March 2013.
Supplemental Data And Analysis
Looking more closely at the data behind the Existing Home Sales March 2014, we can discern a trend from the home price data.
- As shown in the chart below, sales of homes in lower home-price tiers are falling. However, sales of homes in upper price tiers are rising, quite swiftly at the highest end.
- Contributing to rising home sales at the high end and falling home sales at the low end is a likely change in the mix of homes that are selling. We know that there are fewer distressed home sales than in the recent past. But, in addition to fewer distressed properties, homes selling now may have more bedrooms, square footage, and other valuable amenities than homes that were sold last year.
- This shift in the mix of homes selling has the effect of pushing up the median price of homes sold, which is simply the price of the home where 50 percent of all homes sold were priced above and 50 percent were priced below that sales price.
- The rising median home sales price is a remarkably good leading indicator for other price measures that are less susceptible to the mix of homes issue.