March existing home sales: Down, but not out

Don't look now, but a small but positive trend may be forming in the U.S. housing sector, just as the warmer months arrive.

U.S. existing home sales fell three percent in March to a seasonally-adjusted annual rate to 4.57 million units, the the National Association of Realtors announced Wednesday. Economists surveyed by Bloomberg News had expected March existing home sales to decline to a 4.70-million-unit annualized rate.

Further, the median home price for all types of housing plunged 12.4 percent in the past 12 months to $175,200. The median home price for a single-family home fell 11.5 percent to $174,900.

Federal tax credit increases traffic

Also, sales are down 7.1 percent in the past year, with distressed sales now accounting for one half of all sales, the NAR said.

The NAR also said first-time buyers accounted for 53 percent of transactions, and it theorized that the $8,000 federal first-time home buyer tax credit is having an affect on sales traffic.

"Buyer traffic has been rising, and real estate offices are getting phone inquires about the tax credit," said Lawrence Yun, chief economist for the NAR. "By early summer we should be seeing a positive impact on home sales from record-low mortgage interest rates in addition to the stimulus provisions."

Also, inventories of unsold homes declined 1.6 percent to 3.74 million units, or about a 9.8-month supply at the current sales rate.

Meanwhile, sales of single-family homes declined 2.8 percent in March to a seasonally-adjusted annual rate of 4.1 million. Sales of condominiums fell 4.1 percent to a 470,000 annual pace.

Housing sector to bottom this year?

Julia Coronado, senior economist for Barclays Capital in New York, said the housing data is not a cause for a celebration, but she can construct a best case scenario from recent data.

"Our best case assumption, given the very low [mortgage] rates and some easing in credit availability, is that we will see the stability and the gradual process of improving later in the year," Coronado told Bloomberg News Thursday.

By region, in March sales fell 8.0 percent in the Northeast, 4.0 percent in the West, and 1.7 percent in the South; sales were flat in the Midwest.

By region, in March the median home price plunged 18.4 percent in the Northeast to $231,700, 12.2 percent in the South to $146,900, -1.1 percent in the West to $252,400, and 6.1 percent in the Midwest to $141,300.

Housing Sector Analysis: Existing home sales declined about as expected in March, but the fact that first-time home buyers appear to be testing the waters of the housing market may be a ray of light. But one has to attach many qualifiers to that interpretation: March is only one month of data, it's subject to a revision, and inventories remain at very high levels. Further, the decline in home prices continues, and thus far shows no signs of abating. That said, if first-time home buyers continue to enter the market this summer and sales display both momentum and durability, that could mark the beginning of a bottom in the nearly three-year housing sector recession.
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