Existing Sales Remain Flat

Existing home sales decreased 0.2% in March, and fell 7.5% from the same period a year ago. The National Association of Realtors (NAR) reported March 2014 total existing home sales at a seasonally adjusted rate of 4.59 million units combined for single-family homes, townhomes, condominiums and co-ops, down from 4.60 million units in February.
Existing Home Sales March 2014

The Northeast and Midwest increased by 9.1% and 4.0% respectively from February, while the South and West decreased 3.0% and 3.7% respectively. Year-over-year, all regions decreased, ranging from a 3.0% drop in the South to a 13.4% decrease in the West. Seasonally adjusted condominium and co-op sales fell 1.8% in March, and were down 8.3% from the same period a year ago.

First-time buyers comprised 30% of March 2014 sales, up from 28% in February and were unchanged from last March. The January first-time buyer share of 26% was the lowest since NAR began reporting that share monthly in October 2008. The historical average first-time buyer share is about 40%. Tight lending conditions continue to buffet first-time buyers and NAR points to high levels of student debt and tight inventory in the lower price ranges as important factors.

Total housing inventory increased 4.7% in March to 1.99 million existing homes. At the current sales rate, the March 2014 inventory represents a 5.2-month supply, up from a 5.0-month supply in February and up from a 4.7-month supply a year ago. On a positive note, NAR also reported that the March median time on market for all homes was 55 days, down from 62 days in February and 62 days during the same month a year ago. NAR reported that 37% of homes sold in March were on the market less than a month, compared to 34% of all homes sold in February.

As the market cures, the share of distressed sales decreased to 14% of March sales, down from 16% in February and 21% a year ago. Distressed sales are defined as foreclosures and short sales sold at deep discounts. All cash sales comprised 33% of March transactions, down from 35% in February, but up from 30% the same period a year ago. Individual investors purchased a 17% share in March, down from 21% in February and 19% a year ago. Some 71% of March investors paid cash, up from 73% last month.

The median sales price for existing homes of all types increased to $198,500 in March from a downwardly revised $188,300 in February, and was up 7.9% from a year ago. The median condominium/co-op price soared to $200,800 in March, up from a revised $185,100 in February and was up 11.6% from March 2013.

The Pending Home Sales Index fell 0.8% in February to the lowest level since October 2011. Therefore, it was expected that March existing home sales would remain flat. The decline in the March investor share suggests that the continued run up of existing home prices will eventually make these homes less appealing for investors, and a future withdrawal of that demand will further depress existing sales. NAR continues to make the point that increased new home construction will free up existing inventory for first-time buyers.

While existing home sales are down year-over-year, new home sales continue to post year-over-year gains (tempered by recent weather impacts) as investor activity cools. The new home sales numbers will be released tomorrow.

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