Existing-home sales have suffered in recent months due to the continuous imbalance of extremely low inventory levels and rapid home price appreciation, and industry experts believe that this trend will not end anytime soon.
Ten-X's Residential Real Estate Nowcast expects existing-home sales to perform better in March with a 4.8 percent increase from the previous month and a 2.6 percent year-over-year increase. The company projects that sales will fall between seasonally adjusted annual rates of 5.15 and 5.55 million, with a targeted number of 5.32 million.
“Though U.S. home sales have seen significant volatility in recent months due to external factors, sales remain at a high overall level,” said Peter Muoio, Ten-X Chief Economist. “The housing market stands on solid ground despite global economic volatility and weaker U.S. GDP growth, with the firmer labor market and enhanced household budgets from low oil providing a boost to consumer confidence.”
Rick Sharga, Ten-X's EVP, does not believe that existing-home sales will normalize anytime soon with inventory shortages prevalent in the market.
“Both January and February home sales were slightly better than a year ago, and our Nowcast predicts that March will continue that trend," Sharga said. “But inventory levels remain low, and home price appreciation continues to outpace wage growth. These factors suggest that, even with mortgage rates near their historic lows, a return to more ‘normal’ levels of home sales is still off in the distance.”
The National Association of Realtors (NAR) reported that existing-home sales fell in February 2016 after reaching the highest annual rate in six months in January. The report found that existing-home sales decreased 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. However, the report noted that despite last month's large decline, sales remain 2.2 percent higher than a year ago.
The existing-home sales report from NAR for January 2016, showed that lenders are well on the path to recovery from TRID delays. The report found that existing-home sales increased 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Existing sales are now 11.0 percent higher than a year ago, the highest annual rate in six months and the largest year-over-year gain since 16.3 percent July 2013.
"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers," said Lawrence Yun, NAR Chief Economist.
The decline in existing-home sales in February did not slow down home price appreciation. According to the NAR, the median existing-home price in February was $210,800, up 4.4 percent from last February's median price of $201,900. This marks the 48th consecutive month of year-over-year gains. Home prices fell within Ten-X's range of $209,607 to $231,671 predicted in last month’s Nowcast. Now, Ten-X expects that sales prices for existing homes will fall between $209,207 and $231,229 for March with a targeted price of $220,218, representing 4.5 percent month-over-month and year-over-year gains.