The National Association of Realtors reported total existing-home sales remained 10.3 percent higher than a year ago in March 2013 at 4.92 million. Despite the annual increase, March sales were down 0.6 percent from February.
SMU economics professor Michael Fulmer described the slight decline in March sales as “out of character for the market.”
“Home sales typically increase month-on-month from January through summer,” Fulmer said. “That is the trend exhibited during the past decade, and to see a month-on-month decline into March certainly breaks the trend.”
Lawrence Yun, NAR chief economist, attributed the sales slip to tight inventory in the current housing market.
“More people are renting out homes instead of buying these days. It’s more profitable than selling at a loss, from the seller’s standpoint,” James Maillet, a Rogers Healy realtor said.
Fulmer explained the process the housing market has been struggling with since 2006 and the “out-of-character” numbers in March.
“I don’t think anyone expected the recovery in the housing market to be anything less than choppy,” Fulmer said in an email. “That market is facing several challenges: a tight lending market (limited access to capital from mortgage lenders), an abundance of foreclosed homes up for sale, painfully slow growth (0.4 percent in 2012’s fourth quarter) and unemployment stuck at 7.6 percent.”
March showed a 1.6 percent increase in the total housing inventory to 1.93 million existing homes available for sale. There is a 4.7-month supply at the current sales pace, up from 4.6 months in February but still 16.8 percent lower than March 2012. One year ago there was a 6.2-month supply. A supply of over six months is considered to balance the market between home buyers and sellers.
Fulmer said the inventory reported could be an inaccurate account of the true levels of the market, as it doesn’t reflect the amount of foreclosed or “shadow” inventory that banks are holding as assets. Fulmer said that estimates have shown that shadow inventory has increased to about six times the amount present at the peak of the housing bubble in mid-2006. Early 2013 estimates reported just over 2 million homes in shadow inventory.
Distressed home sales, which include foreclosures and short sales, accounted for 21 percent of March sales. Distressed sales were 25 percent of sales in February and 29 percent in March 2012.
The national median existing-home price rose 11.8 percent to $184,300 in March — the strongest increase since November 2005. Median time on the market for all homes in March was 62 days, 12 days less than February and 32 percent lower than March 2012’s 91 days.
Specifically in the South, existing-home sales followed the national March trend, slipping 1.5 percent to an annual level of 1.95 million in March. However, that level is 12.7 percent higher than one year ago. Sales in the Northeast were unchanged; the Midwest saw a rise and the West declined along with the South.
Fulmer summed up the effects of the March numbers.
“We know that there was this unexpected drop in home sales in March, but at least we’re doing better than last year,” he said. “The year-over-year increase in both sales and prices in the market is reflecting the rising demand taking place as families are looking to buy a new or existing home. That being said, that market has still got a long road ahead of itself to recover from the 2006-2008 crash.”
