March Existing Home Sales Down 5%

Mike Sorohan msorohan@mba.org

April 23, 2019

Existing home sales fell back in March following February's surge, the National Association of Realtors reported yesterday.

NAR said total existing home sales fell by 4.9% from February to a seasonally adjusted annual rate of 5.21 million in March. Sales as a whole are down 5.4% from a year ago (5.51 million).

Single-family home sales fell to a seasonally adjusted annual rate of 4.67 million in March, down from 4.91 million in February and down 4.7% from 4.90 million a year ago. The median existing single-family home price rose to $261,100 in March, up 3.8% from a year ago. Existing condominium and co-op sales fell to 540,000 units in March, down by 5.3% from February and down by 11.5% from a year ago. The median existing condo price rose to $244,400 in March, up 3.6% from a year ago.

All four regions saw declines. Sales in the Northeast decreased by 2.9% to an annual rate of 670,000, 1.5% below a year ago. The median price in the Northeast rose to $277,500, up 2.5% from a year ago. In the Midwest, sales declined by nearly 8% from last month to an annual rate of 1.17 million and by 8.6% from a year ago. The median price in the Midwest rose to $200,500, up 4.6% from last year.

Sales in the South dropped by 3.4% to an annual rate of 2.28 million in March, down by 2.1% from last year. The median price in the South rose to $227,400, up 2.4% from a year ago. Sales in the West fell by 6.0% to an annual rate of 1.09 million in March, 10.7% below a year ago. The median price in the West rose to $389,300, up 3.1% from a year ago.

"Sales have been volatile in 2019 thus far, but the average for the first three months of the year is around 5 percent lower than in 2018," said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. "We had expected this to be stronger, given the solid economy and job market, but the high end of the market has started to cool off, and the lower price tiers are still hampered by a lack of availability."

"Some pullback was estimated following February's big jump but the drop was somewhat larger than expected," said Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C. "Sales in higher-price parts of California and the Northeast have slowed significantly but sales in more modestly priced markets have held up relatively well."

Vitner stressed home sales are "soft--not weak," noting the chief concern is the pullback in mortgage rates, which brought the commitment rate for conventional 30-year mortgages down to 4.27% from around 5% in October and November, which has not done more to boost sales. "We suspect that lower rates have boosted demand but only at more affordable price points, where inventory is still relatively scarce," he said. "Conditions are slowly improving on that front."

NAR Chief Economist Lawrence Yun said it was "not surprising" to see a retreat in March after a powerful surge in sales in the prior month. "Still, current sales activity is underperforming in relation to the strength in the jobs markets," he said. "The impact of lower mortgage rates has not yet been fully realized."

NAR reported the median existing home price for all housing types in March rose to $259,400, up 3.8% from a year ago ($249,800), marking the 85th straight month of year-over-year gains.

Total housing inventory at the end of March increased to 1.68 million, up from 1.63 million in February and a 2.4% increase from 1.64 million a year ago. Unsold inventory is at a 3.9-month supply at the current sales pace, up from 3.6 months in February and up from 3.6 months a year ago.

"Further increases in inventory are highly desirable to keep home prices in check," Yun said. "The sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth."

The report said properties remained on the market for an average of 36 days in March, down from 44 days in February but up from 30 days a year ago. Forty-seven percent of homes sold in March were on the market for less than a month.

First-time buyers were responsible for 33% of sales in March, up from last month and a year ago (32% and 30%). All-cash sales accounted for 21% of transactions in March, down from February's 23%, but up from a year ago (20%). Individual investors purchased 18% of homes in March, up from February's 16%, and up from a year ago (16%).

Distressed sales represented 3% of sales in March, down from 4% last month and down from 4% in a year ago. One percent of March 2019 sales were short sales.

Kan said limited inventory of entry-level homes continues to slow would-be first-timers, but lower mortgage rates and moderating home-price growth should continue to support home sales in the coming months. "We expect sales to pick up as long as more inventory comes onto the market," he said.

Vitner, however, was less optimistic. "We do not see demand taking off, however, as homes affordability and the proportion of consumers stating that now is a good time to buy a home has been declining for the past few years," he said. "The good news is that home price appreciation is moderating and wages and salaries are rising more rapidly, which should boost affordability somewhat this year."

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