NAR: February Existing-Home Sales Rose As Inventory Increased Slightly

The Federal Savings Bank was pleased to see that The National Association of Realtors reported sales of existing homes increased to a seasonally adjusted annual rate of 4.88 million in February, up 1.2 percent from the previous month. While there was a small gain in home sales month over month, this year’s home sales have been part of a larger trend where 2015 sales are outpacing 2014 figures.
February sales rise year over year
February sales rose 4.7 percent from February 2014, the fifth month in a row for year-over-year sales gains. Another major trend in the latest figures was the increase in existing-home prices.
The NAR noted that existing-home sales may have slowed because of the harsh weather in various parts of the country. While sales decreased 6.5 percent in the Northeast, sales were 1.9 percent higher in the South from the previous month.
“Severe below-freezing winter weather likely had an impact on sales, as more moderate activity was observed in the Northeast and Midwest compared to other regions of the country,” NAR Chief Economist Lawrence Yun said in a statement.
Another factor that could potentially hinder home sales early in the buying season is the lack of inventory on parts of the U.S. Low supply of existing homes could push prices up and make some houses out of reach for buyers. The NAR reported the median existing-home prices was 7.5 percent higher in February than the same month a year ago.
Although home prices have increased, possibly impacting first-time home buyers, the rise in prices could actually help boost inventory in the market. Yun said homeowners like to see solid price growth because it means they are building wealth via equity. The rise in equity could serve as an incentive for current homeowners to put up their homes for sale.
Increase in inventory, wages
A rise in housing inventory could slow down price growth and enable first-time home buyers to join homeowners in the market. Housing inventory in the U.S. rose to 1.89 million existing homes, up 1.6 percent in February, according to NAR.
Despite prices continuing to rise, incomes will also increase, allowing homeowners to be in better financial standing to afford their mortgages, as reported by Bloomberg on March 23rd.
The increase in wages and salaries along with the employment growth in the U.S. could contribute to the housing recovery after severe weather affected existing-home sales. The NAR said it had a positive outlook for housing demand in the future because a higher employment rate could signal a strong economy.
“Rising incomes, albeit at a subdued pace, still-low borrowing costs and job creation remain the pillars supporting a stronger U.S. housing market,” Jennifer Lee, BMO Capital Markets senior economist, said in a note, according to Bloomberg.
Additionally, interest rates continue to be low, as Freddie Mac noted the average 30-year fixed-rate mortgage decreased in the week ended March 19. The latest rate is the closest to one of the lowest rates recorded by Freddie Mac.
First-time home buyers interested in looking for homes while interest rates are low can contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.