–Feb Revised Up Slightly; Distressed Sales Decline
–Factors Aligned to Sustain Sales Pace All Year – Chief Economist
–‘Starting to See the Upper End Market Move’

By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – Finishing the best first quarter in five years,
sales of existing single-family homes, town homes, condominiums and
cooperatives declined 2.6% in March to a below-expected 4.48 million
annual sales rate, yet stayed “relatively strong” as sales are seen
doing for the rest of the year, the National Association of Realtors
reported Thursday.

February’s sales rate was revised up slightly, to 4.60 million from
4.59. In a positive note for the housing market as a whole, sales of
distressed properties became a smaller piece of the sales pie chart in
March, down to 29% from February’s 32% and the 40% of a year earlier.

NAR Chief Economist Lawrence Yun told reporters that the
fundamentals of the market including low mortgage rates, rising rents,
steady job creation, a higher stock market and expected increases in
household formation promise the year as a whole will be the best in five
years, just as was the first quarter.

“It was the second consecutive month of sales decline,” Yun said,
“but nonetheless the first-quarter average was 4.57 (million) or
something close to 4.6, and if we can hold at this level, it would
represent the highest annual sales activity in five years.”

He cited “nine consecutive months of year-over-year sales gains,
and based on the Realtor confidence index, it is implying there are
further gains down the line. This appears to be very sustainable,”
unlike last year. “This time,” he continued, “we don’t think there will
be any fizzling out of activity in the second and third quarter.”

The supply of homes available in March was 2.37 million, equivalent
to 6.3 months supply at the current rate of sales, the same as February
and well below the 8.5 months in March of last year.

The national median sales price, at $163,800 in March, was up 2.5%
from a year earlier and saw a large $8,200 jump from February,
reflecting another positive development, Yun said, a move to more
upscale units. Those selling in March for $500,000 to $750,000 increased
6.9% compared to a year earlier. Those that had been selling well at the
low end, $100,000 or less, saw sales decline in March by 2.4%.

“For the first time in a long time, we are starting to see the
upper end market move,” Yun said, perhaps a reflection “of the strong
rebound in the stock market.”

Sales were down or unchanged in all four geographic regions,
dropping the most in the West, by 7.4%.

“Foreclosures are actually lower,” Yun said. “The overall
foreclosure inventory is lower, foreclosure starts are lower. The only
place foreclosures are not lower is where the judicial system is holding
things back,” like New Jersey and Connecticut.

Fewer foreclosures mean less downward pressure on prices.
Foreclosed houses sold for 19% below the market price in March. Short
sales, the other component of the distressed category, sold at a 16%
discount.

On the negative side, he said, are reports from Realtors in some
markets, in Seattle, Orange county, Calif, and South Florida in
particular, that inventory is becoming scarce, holding back existing
home sales. While it is better to have scarce supply than demand, the
trend could start choking the sales pipeline as potential buyers cannot
find new homes and so delay placing their old home on the market.

The proportion of first-time buyers, at 33% in March, is still way
below the 40% that would reflect a healthy market, Yun said.

The 80% of the builders who are small scale, at fewer than 20 homes
a year, are being shut out of construction loans, he said, and can’t
build. The big homebuilding firms, though, have plenty of credit but
only build one out of five new homes.

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$$AG$,M$U$$$,MAUDS$]