U.S. Existing Home Sales Rose Robustly in February
March 21 2018 - 10:30AM
Dow Jones News
By Laura Kusisto and Sarah Chaney
WASHINGTON--Sales of previously owned U.S. homes rose strongly
in February, overcoming stiff headwinds from a shortage of
inventory and affordability concerns caused by rising mortgage
rates and home prices.
Existing-home sales rose 3% in February from the previous month
to a seasonally adjusted annual rate of 5.54 million, the National
Association of Realtors said Wednesday.
Economists surveyed by The Wall Street Journal had expected home
sales to remain essentially flat, rising just 0.4% to 5.4 million
in February.
Compared with a year earlier, sales in February were up 1.1%.
"Housing demand still remains quite strong" despite headwinds from
lack of inventory and affordability, said Lawrence Yun, chief
economist at the National Association of Realtors.
Affordability is a growing obstacle for new buyers trying to
enter the market. The national median existing home price rose 5.9%
in February compared to a year earlier to $241,700.
That is being compounded by rising mortgage rates. The average
rate nationwide for a 30-year, fixed-rate mortgage climbed nearly
half a percentage point to 4.43% by the beginning of March from
3.95% at the beginning of January, according to mortgage-finance
giant Freddie Mac. Rates as of last Thursday stood at 4.44%,
according to Freddie Mac. Borrowing costs remain low by historical
standards.
Mr. Yun said rising mortgage rates appear to be locking some
owners into their current homes because if they sell they will face
higher mortgage rates.
The tax bill that passed late last year also reduces the tax
advantages afforded to homeowners, which could have some impact on
the market, especially in high-cost regions such as New York, New
Jersey, California and high-end suburbs of Chicago. Sales were
strong last month in the West but sluggish in the Northeast.
Thus far, Mr. Yun said the tax bill is having less of an impact
on the market than the Realtors had warned. "Surprisingly consumers
are not looking at the mortgage interest deduction or the property
tax deduction," he said.
A shortage of available houses on the market has driven up
prices in many regions. There was a 3.4 month-supply of homes on
the market at the end of February, based on the current sales pace,
down from 3.8 months of supply at the same time last year.
Economists consider six months worth of inventory indicative of a
balanced market between buyers and sellers. Total housing inventory
declined in February from a year earlier to 1.59 million existing
homes for sale.
"We are still in a critical housing shortage situation," Mr. Yun
said.
Builders are struggling to ramp up construction to meet demand
and alleviate this supply shortage. Total U.S. housing starts,
which includes single-family homes and apartments, fell 7% in
February, the Commerce Department said last week. Single-family
starts crept up 2.9%, though they remain well below normal
levels.
Economists say the lack of supply, along with new headwinds to
demand from the tax bill and mortgage rates, could lead to a weak
spring selling season, with sales expected to remain essentially
flat from last year. That could offer some good news for buyer, who
may have a little more wiggle room to negotiate.
Write to: Laura Kusisto at laura.kusisto@wsj.com and Sarah
Chaney at sarah.chaney@wsj.com
(END) Dow Jones Newswires
March 21, 2018 10:15 ET (14:15 GMT)
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