For the first time in seven months, existing home sales increased, says the National Association of Realtors. February sales rose nearly three percent over January. That’s encouraging says the NAR, but is it enough to spur buyers?
For one thing, the sales pace, even improved, is still nearly 24 percent lower than a year ago, and year-over-year home prices are down over 8 percent.
But that’s exactly why home sales are improving. Home sellers have dropped prices enough to be attractive, and coupled with below six percent interest rates, February was a good time for buyers to lock a rate and put a contract on a home.
Consider that home prices in February 2007 were $213,500 and interest rates for the month averaged nearly 6.5 percent. In 2008, prices are $195,000 and interest rates averaged 5.9 percent.
So it shouldn’t be surprising that housing inventories have dieted down to a 9.6-month supply from over 10-months on hand in January.
Metropolitan areas are showing the most growth in housing sales with roughly half the major markets showing mild increases. For those communities with the density to support multi-family homes like condominiums and coops (up 3.7 percent), the improvement in sales was even greater than single-family (up 2.8 percent.) by 30 percent. Condos and coops also held their prices a little better than single-family homes at $211,700 or five percent below February 2007. That’s despite a 13-month supply on hand.
Market gains were highest in those areas in communities that are helping themselves — like Oklahoma City — which has put millions into the revitalization of its downtown and has plans to extend its scenic historic district water feature, the Bricktown Canal, through the warehouse district around the city.
They’re also improving in areas that were depressed because of overspeculation such as the Western segment dominated by California, Nevada and Arizona. Existing-home sales in the West are down 13.4 percent from a year ago, and the median price is down the most of any region at 29.2 percent. But the good news is that sales slipped only one percent in February, which suggests that the slide could be coming to an end.
One month doesn’t make a spring, things could be improving but only if more homes aren’t dumped on the market, interest rates hold in a reasonable range, and the credit crisis improves.
One ways to see if there’s a positive trend is to watch for the new home sales report from the Commerce Department, due Wednesday.