Existing-Home Sales Rebound in February, Market Stabilizing
WASHINGTON (March 23, 2006) – Existing-home rose in February following five months of decline, indicating a stabilization is taking place in the market, according to the National Association of Realtors®.
Total existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 5.2 percent to a seasonally adjusted annual rate1 of 6.91 million units in February from an upwardly revised pace of 6.57 million in January, but were 0.3 percent below a 6.93 million-unit level in February 2005.
David Lereah, NAR’s chief economist, said mild weather appears to be responsible for some of the gain. “Weather conditions across much of the country were unseasonably mild in January and likely were a factor in higher levels of buyer activity, which boosted sales that closed in February,” he said. “Higher interest rates had been tapping the breaks, notably in higher-cost housing markets since mortgage interest rates trended up last fall, but we’re seeing signs of stabilization in the market now with the sales rebound. Home sales should level-out in the months ahead.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.25 percent in February, up from 6.15 percent in January; the rate was 5.63 percent in February 2005.
NAR President Thomas M. Stevens from Vienna, Va., said comparisons with market performance over the last five years distort what people should expect from housing as an investment. “Housing is simply returning to a normal market, where annual home prices will rise a little faster than the overall rate of inflation,” said Stevens, senior vice president of NRT Inc. “However, in looking at total returns, you need to consider that the typical buyer is making only a modest downpayment but enjoys a return on the full value of the home, which is many times the actual cash investment. In other words, normal is pretty good for the typical homeowner, and that’s what we expect for the foreseeable future.”
Stevens noted that price appreciation has yet to cool significantly. “We’re still seeing double-digit annual price gains, but we should get down to single-digit appreciation fairly soon,” he said.
The national median existing-home price2 for all housing types was $209,000 in February, up 10.6 percent from February 2005 when the median was $189,000. The median is a typical market price where half of the homes sold for more and half sold for less.
Total housing inventory levels rose 5.2 percent at the end of February to 3.03 million existing homes available for sale, which represents a 5.3-month supply at the current sales pace – the same as in January.
Single-family home sales increased 4.7 percent to a seasonally adjusted annual rate of 6.06 million in February from 5.79 million in January, and were 0.2 percent below the 6.07 million-unit pace in February 2005. The median existing single-family home price was $208,500 in February, up 11.6 percent from a year ago.
Existing condominium and cooperative housing sales rose 8.8 percent to a seasonally adjusted annual rate of 850,000 units in February from a level of 781,000 in January. Last month’s sales pace was 1.5 percent below the 863,000-unit pace a year ago. The median existing condo price3 was $214,300 in February, up 3.5 percent from February 2005.
Regionally, existing-home sales in the Northeast jumped 19.2 percent to an annual sales rate of 1.18 million units in February, and were 2.6 percent higher than February 2005. The median price in the Northeast was $263,000, which is 5.2 percent higher than a year ago.
Total existing-home sales in the Midwest rose 11.1 percent to a pace of 1.60 million in February, and were 1.9 percent above a year earlier. The median existing-home price in the Midwest was $160,000, up 3.9 percent from February 2005.
In the West, existing-home sales increased 5.1 percent to an annual pace of 1.44 million in February, but were 10.6 percent below February 2005. The median price in the West was $306,000, up 12.1 percent from a year ago.
Existing-home sales in the South fell 2.5 percent in February to a level of 2.69 million, but were 3.1 percent higher than a year ago. The median price in the South was $182,000, up 11.7 percent from February 2005.
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The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.# # # 1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
3Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for March will be released April 25. The next Pending Home Sales Index will be on April 3 and the forecast will be revised April 11.
NAR will soon revise national and regional monthly median existing-home prices back to 1999. The fixed reporting sample of representative multiple listing services has been updated to reflect geographic changes over time so that the monthly samples for regional price measurements are as accurate as possible. The changes in price patterns will be consistent with previously reported data.
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