By Orlando Rodriguez
Sales of existing homes in the United States were down slightly in February, with investors continuing to account for a third of all sales and home prices moving up only slightly.
The National Association of Realtors reported Wednesday that overall sales were down 0.9 percent last month, while large amounts of foreclosed homes keep home prices stubbornly stagnant.
Median home prices now stand at $156,600 nationwide, up only 0.3 percent from a year ago. This comes as sales of foreclosed homes continue to account for a significant portion of the market.
33 percent of all transactions reported in February were all cash deals, up 2 percent, a continuing indicator of significant investor activity.
“The bottom line is investors and first-time buyers are competing for bargain-priced properties in much of the country,” said Moe Veissi president of NAR. “When markets are balanced, we normally see prices rise one to two percentage points above the rate of inflation, but foreclosures and short sales are holding back median prices.”
Sales of distressed properties were down only one percentage from January while inventories rose 4.3 percent, a sign that housing prices should only be rise slightly in the coming months. This is disappointing news yet again for sellers hoping for a boost in prices.
For buyers however, this is continued good news. Large stocks of discounted homes combined with mortgage rates at historic lows, should continue to pull buyers who have been in a holding pattern, into the market.
According to Freddie Mac, the average commitment rate for a 30-year fixed mortgage now stands at 3.89 percent, an all time low. This compared to 4.95 percent a year ago.
Lawerence Yun, chief economist for NAR sees the combination of inventory and low rates as a good omen, saying that the market may see a wave of activity in the coming months.
“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” Yun said. “The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth.”
This is a distinct possibility, given the number of homes with sales closings on tap. Pending home sales were up last month 9.2 percent from a year ago causing some analysts to be bullish on home sales during the upcoming spring season.
But the pending home sales indicator, unlike existing home sales, only reflects properties that receive contract offers, not completed sales, a distinct difference. Some mortgage agents have said that even though they have seen a rise in houses going to the contract phase, many deals still do not get completed in the end.
“We’re not getting closings done, deals that are supposed to close are not,” said Jamie Cornwall, an agent with Miralex Mortgage in New York City. “Clients are getting frustrated with me, thinking I’m doing something wrong. But it’s not me, it’s the banks. They are asking for a whole bunch of extra paperwork that most people just can’t bring to the table. The banks don’t want to try anybody basically.”