Existing Home Sales Edge Down as Prices Rise

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.

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Existing Home Sales Edge Down as Prices Rise

Nationally, the average gas price hit a recent high of $3.74 per gallon, nearly $0.50 higher than it was on Jan. 1. According to website GasBuddy.com, that's about a 14 percent increase since the start of the year.

The start of the new year also marked the end of the temporary 2 percentage point tax break on Social Security contributions. Once that part of President Obama's stimulus package expired, your paychecks went back to being 2 percent smaller. For the average family, that adds up to about $1,000 a year.

That same "average family," by the way, already earns only about $50,000 a year today. And according to CNN, that's about $4,000 less than you were earning in 2000.

A disconcerting report from Sallie Mae last week showed that about one-third of Americans working toward retirement are having to raid their retirement savings to pay for their kids' college educations.

According to a poll commissioned by Bankrate.com (RATE) in February, only 55 percent of Americans have enough money tucked away in their savings accounts and "emergency funds" to cover the amounts owed on their credit cards.

That Bankrate poll also revealed that among women in particular, 51 percent actually owe more on their credit cards than they have cash in the bank. Digging deeper into the data, Bankrate reported that while high earners are doing well, and generally flush, most people (59 percent) who earn less than $30,000 annually owe more on their cards than they have in savings. And these are the people least able to afford the high cost of credit card interest.

Speaking of earnings -- and jobs -- the same unemployment report that set Wall Street to cheering Friday can be looked at from a glass half empty perspective as well. The new, lower unemployment level of 7.7 percent is the best number we've seen since the Great Recession ended. However, The Wall Street Journal points out that 7.7 percent is very close to the worst unemployment ever got (7.8 percent) in the 1991 recession. Our best number in years is within a whisker of the worst they faced back then.

The overall workforce participation rate -- the percentage of Americans currently earning wages at all -- currently stands at just 63.5 percent. According to the Bureau of Labor Statistics, that's much worse than what we saw in the 1991 recession. It's the lowest we've seen since the recession that hit during the Carter administration.

Little wonder, then, that according to the Bankrate survey, people are increasingly concerned about "job security." Friday's unemployment report may suggest that the jobs market is on the mend, but most people (59 percent) say they feel no more or less  confident in their employment situation today than they did a year ago. Among those polled whose opinions have changed, 23 percent said they feel "less secure today" than they did a year ago, versus 19 percent who feel more secure.

That doesn't exactly jibe with the story that things are getting better.

It's great news for folks who own stocks, no doubt, and according to the Journal , more than 90 percent of people earning $100,000 or more do. But what about the rest of us? Fewer than 46 percent of Americans earning less than $50,000 are invested in the stock market -- and remember, "$50,000" is the average income in America today.

So yes, It turns out for the average American, things may not be getting better at all.

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