A downward trend in existing home sales continued in March but runaway home prices kept up their own pace too, a sign of a seriously unbalanced market.
U.S. existing home sales fell to a seasonally adjusted annual level of 4.59 million last month, down 0.2 percent from February’s 4.60 million, according to data from the National Association of Realtors. Compared with March 2013, sales were down 7.5 percent. Sales are now at their slowest pace in almost two years, since July 2012.
At the same time, the median existing home price rose to $198,500, up $10,000 from $188,300 in February and up 7.9 percent from the previous year. Part of the jump in prices is due to the decreasing number of distressed properties for sale. In March, the total fell to 14 percent of all sales, down from 16 percent in February and 21 percent the year before. Foreclosures made up 10 percent while short sales accounted for the other 4 percent. Foreclosure discounts averaged 18 percent below market value, and short sales had an average discount of 12 percent.
The NAR chief economist Lawrence Yun recognized that falling sales and rising prices is not healthy. “There really should be stronger levels of home sales given our population growth,” he said in a statement. “In contrast, price growth is rising faster than historical norms because of inventory shortages.”
Inventory actually rose in March, but still remains well below market demand. There were 1.99 million existing home for sale last month, a 4.7 percent increase from February. At the current sales rate there was a 5.2-month supply available. The NAR considers a real estate market balanced between buyers and sellers when there is a 6-month supply.
The NAR remains optimistic about existing home sales in 2014, though. “With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly.”