Existing Home Sales Edge Down as Prices Rise

<b class="credit">Daniel Acker/Bloomberg</b>
Daniel Acker/Bloomberg

By Margaret Chadbourn

WASHINGTON -- U.S. home resales edged downward in March, pointing to some slowdown in the housing market recovery pace as overall economic activity cools. The National Association of Realtors said Monday existing home sales slipped 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units.

Economists polled by Reuters had expected home resales to rise to a 5.01 million-unit rate.

"The disappointing pace of home sales provides some evidence that positive momentum in the housing sector is beginning to leak lower," said Millan Mulraine, a senior economist at TD Securities in New York.

Still, the housing market recovery that has helped boost the economy remains intact, and there is some evidence the slowdown in sales may represent supply constraints more than crimped demand. Sales in March were 10.3 percent higher than the same month last year, and the median price for a home resale was up 11.8 percent, the biggest increase since November 2005, to $184,300.

"The report suggests that the overall thrust of the sector remains positive, with the demand and supply dynamics continuing to favor further price gains," said Mulraine. The data added to other reports such as employment and factory activity suggesting a loss of momentum in the economy as the first quarter ended.

U.S. stocks were mixed as corporate earnings pointed to an uncertain growth outlook. Prices for U.S. Treasury debt rose to session highs on the data as it was seen as confirmation of some slowing in U.S. economic growth.

Supply Constraints

The supply of existing homes on the market for sale rose 1.6 percent during the month to 1.93 million, which represented 4.7 months' supply at March's sales pace, up from 4.6 in February. That's is way below the 6 months' worth normally considered as an ideal balance between demand and supply. A year earlier, the inventory of unsold homes was 2.32 million, a 6.2 months' supply.

More homes are expected to go on the market next month ahead of the summer buying season, said NAR economist Lawrence Yun. Still, the drop in inventory of homes for sale compared with the prior year signals it may be pinching sales.

Sales of higher-priced homes have shown larger gains over the past year in comparison with those properties below the $100,000 range, the NAR said. Those homes priced above $500,000 are showing a 25 percent better pace of sale while those below $100,000 have seen sales drop 16 percent from a year ago.

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Meanwhile, the share of distressed sales, which also include those where the sales price was below the amount owed on the home, has decreased and accounted for 21 percent of home resales last month. That was down from 25 percent a month earlier, and was the lowest since the NAR began tracking the number in October 2008 as the foreclosure crisis escalated.

Distressed sales are on the decline as home prices move upwards and supply dwindles. Many investors have snapped up properties at deep discounts since the housing bubble burst, taking advantage of cheap borrowing costs and affordable prices.

U.S. mortgage rates slipped last week for the third straightweek, according to Freddie Mac. Rates for 30-year fixed mortgages fell to 3.41 percent in the week ended April 18, down from 3.43 percent a week earlier.

The slowdown in activity is coupled with new home construction picking up 7.0 percent in March to a 1.04 million-unit annual rate, the highest since 2008, the Commerce Department said last week. However, the rise in starts was driven by the volatile multi-family sector and permits for future construction projects fell 3.9 percent.