Sales Tumble Amid Alarmingly Low Inventories
March 21, 2016
Existing-home sales plunged in February as the number of homes for-sale continued to be severely limited and home prices accelerated, according to the latest housing report released by the National Association of REALTORS®. All major regions across the U.S. saw sales decline in February; the Northeast and Midwest saw the largest decreases.
A look at existing-home sales in February performed across the country:
- Northeast: existing-home sales fell 17.1 percent to an annual rate of 630,000, but remain 5 percent above a year ago. Median price: $239,700 -- 0.8 percent below a year ago.
- Midwest: existing-home sales plunged 13.8 percent to an annual rate of 1.12 million in February (the same as February 2015). Median price: $162,700 -- up 6.3 percent from a year ago.
- South: existing-home sales dropped 1.8 percent to an annual rate of 2.20 million in February, but remain 3.3 percent higher than a year ago. Median price: $186,400 -- up 5 percent from a year ago.
- West: existing-home sales fell 3.4 percent to an annual rate of 1.13 million in February, but remain 0.9 percent higher than a year ago. Median price: $308,800 – 7 percent higher than a year ago.
Total existing-home sales – which are completed transactions for single-family homes, townhomes, condos, and co-ops – dropped 7.1 percent month-over-month to a seasonally adjusted annual rate of 5.08 million in February. Still, sales are 2.2 percent higher than a year ago, NAR reported.
The housing market is failing to keep pace with what had been a strong start to 2016, says Lawrence Yun, NAR’s chief economist.
“Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” Yun says. “The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February’s lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”
The drop in home sales comes at a time when nationwide job growth is growing. However, more households are showing some uneasiness about the economy and questioning whether it’s starting to lose some of its momentum.
“The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers,” says Yun.
5 Latest Stats to Gauge the Market
Here is an overview of some of the latest housing indicators from NAR’s February housing report.
1. Home prices: The median existing-home price for all housing types in February was $210,800 -- up 4.4 percent from a year ago ($201,900).
2. Inventories: Unsold inventory in February was at a 4.4-month supply. Total housing inventory by the end of the month increased 3.3 percent to 1.88 million existing homes available for sale. Inventories are still 1.1 percent lower than a year ago (1.90 million).
3. Days on the market: Thirty-five percent of homes sold in February were on the market for less than a month. Properties, on average, remained on the market for 59 days in February, below the 62 days from a year ago. Short sales were on the market the longest amount of time at 126 days. Foreclosures and non-distressed homes were on the market a median of 57 days.
4. Distressed sales: The number of foreclosures and short sales rose to 10 percent in February, up from 9 percent in January. That said, distressed sales are down from 11 percent a year ago. Foreclosures made up 7 percent of sales and short sales comprised 3 percent sales. Foreclosures sold for an average discount of 17 percent below market value in February; short sales were discounted, on average, 16 percent below market value.
5. All-cash transactions: All-cash sales comprised 25 percent of transactions in February, a drop from 26 percent a year ago. Investors make up the biggest bulk of all-cash purchases. Sixty-four percent of investors paid all-cash for their home purchase in February.
“Investor sales have trended surprisingly higher in recent months after falling to as low as 12 percent of sales in August 2015,” Yun says. “Now that there are fewer distressed homes available, it appears there’s been a shift towards investors purchasing lower-priced homes and turning them into rentals. Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.”
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Updated: August 14, 2018