Sales of existing homes dropped to their second lowest rate in a year just one month after nearing their highest post-recession level and sales of new home recovered but slightly as stagnant wages and relatively expensive and scarce inventory inhibited buyers
Purchases of previously occupied homes declined 7.1 percent in February to an annualized pace of 5.08 million units, reported the National Association of Realtors on Monday. January’s 5.47 million rate was just shy of the 5.48 million pace last July which had been the strongest turnover since February 2007. Economists had forecast a decline of 3 percent to 5.30 million homes.
Sales are recorded at closing which normally take place with two months of a signed contract. A small percentage of contracts never close, usually because the purchaser was unable to find a mortgage.
Purchases of new homes rose 2.0 percent in February, for the fourth gain in five moments, to a 512,000 seasonally adjusted annual rate, from January’s revised 502,000 base, originally 494,000, reported the Commerce Department on Tuesday. Analysts had predicted 510,000 annual sales.
Demand for newly built homes has been stable for the past 14 months averaging 503,000 annually the best sustained pace since the housing collapse of 2006, 2007 and 2008. .
Purchases of existing homes slipped in all four regions last month, 17.1 percent in the Northeast, 13.8 percent in the Midwest, 3.4 percent in the West and 1.8 percent in the South. Sales of single family homes sank 7.2 percent to 4.51 million units, condominium and cooperatives sales fell 6.6 percent to 570,000.
The median sale price for a previously occupied home was $210,800 in February up from $210,900 the prior year.
There were 1.88 million homes listed for sale in February, 1.1 percent fewer than the prior year. It would take 4.4 months to clear the market of available inventory, up from 4 months in January but down from last February's 4.6 months.
First time home buyers accounted for about 30 percent of purchases in February, compared to about 40 percent in a normal market.
Low borrowing costs have helped support the housing market. The average 30-yeat fixed rate mortgage was 3.73 percent at the end of last week essentially unchanged from a year earlier, despite the Fed’s announced program of rate normalization and the first Fed Funds increase in almost a decade.
Even though finance rates have remained low, the cost of a mortgage generally impacts only the marginal buyer.
Most people determine on a home purchase when they feel able to bear the burden of long term mortgage payments. For that decision salaries and wage increases are far more important.
Wages and salaries have been moribund since the end of the recession in June 2009, averaging just a 2.1 percent increase annually. As the consumer price index has average 1.7 percent since the beginning of 2010, consumers have little extra income to spend and no reason to expect higher wages.
As many people buy a home when starting a family, the lack of anticipated wage gains may be the most important factor preventing people from taking the plunge in what, for most people is their largest lifetime purchase.
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