Washington: Sales of existing homes bounced back in February after two months of declines, boosted by big gains in the South and West, according to US industry figures released Wednesday.
The National Association of Realtors said the gains came despite low inventory of homes for sale and rising prices, factors that have plagued the very tight housing market for many months.
Total sales of existing homes, which includes single-family houses, townhouses, condos and co-ops, jumped three percent from January to an annual rate of 5.54 million, seasonally adjusted, NAR said. That was well above analyst expectations.
But sales by region were uneven, with the Northeast and Midwest seeing declines due to “unseasonably cold weather.”
“A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,” NAR chief economist Lawrence Yun said in a statement.
“The very healthy US economy and labor market are creating a sizeable interest in buying a home in early 2018.”
However, home prices — especially in the West — shot up considerably, he said. “Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.”
The median home price jumped 5.9 percent from a year earlier to $241,700 — the 72nd consecutive increase.
– Rush to lock in rates –
But analysts note the prospect of rising interest rates may have sparked a rush to finalize purchases in February.
In addition to the rising prices, the average interest rate for 30-year mortgages rose for the fifth straight month to 4.33 percent, the highest level in nearly four years. And rates are expected to continue to move up as the Federal Reserve moves to ward off inflation, with another hike in the benchmark lending rate expected later Wednesday.
Economist Mickey Levy of Berenberg Capital markets said the jump in sales last month was “likely boosted by the rush to lock in mortgage rates in advance of further increases.”
“But anecdotal surveys indicate that scarce supply of lots and labor, tight regulation, and higher input costs will weigh on new construction and that demand will continue to outpace supply,” Levy said in a research note.
The inventory of homes on the market rose 4.6 percent from January to 1.59 million, but that was still 8.1 percent below year-ago levels. The year-over-year measure has fallen for 33 months, NAR said.
And Levy noted that builders are focusing on high-end single-family homes to maintain their margins, to the detriment of multi-family units.
NAR said condominium and co-op sales dropped 6.5 percent last month.
Broken down by region, the Northeast saw a decline in total sales of 12.3 percent and the Midwest dipped 2.4 percent. Sales in the South jumped 6.6 percent, while the West saw a surge of 11.4 percent.
With construction lagging, demand is under pressure, and properties sold in February stayed on the market for just 37 days, compared to 41 days in January and 45 days a year earlier.