Sales of existing homes tumble

Rate hits lowest point since 2012

Purchases of previously owned homes in the U.S. declined in February to the lowest level since July 2012, a sign the industry faces headwinds.

Contract closings on existing properties fell 0.4 percent to a 4.6 million annual rate, matching the median projection in a Bloomberg survey, the National Association of Realtors said Thursday. Prices rose 9.1 percent from a year earlier.

The slowdown in sales since the middle of last year reflects a rise in mortgage interest rates, declining affordability and, more recently, bad weather. Faster job growth, which generates bigger income gains, is needed to spur demand and allow housing to contribute more to the economy.

“There are some headwinds out there,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who correctly forecast the pace of sales. “Housing affordability has come down a bit as mortgage rates have come up from recent historic lows. The weather was a factor, and we expect that to be turning around shortly.”

Estimates in the Bloomberg survey of economistsranged from 4. 5 million to 4.76 million. The prior month’s pace was unrevised at 4.62 million.

The median price of a previously owned home rose from February 2013, to $189,000, Thursday’s report showed.

Sales of homes priced $250,000 and less declined, while those selling for more increased.

First-time buyers accounted for 28 percent of all purchases in February, up from 26 percent in January - which was the lowest in data going back to October 2008.

Compared with a year earlier, purchases decreased 6.9 percent on an unadjusted basis.

The number of previously owned homes on the market rose 6.4 percent to 2 million. At the current sales pace, it would take 5.2 months to sell those houses, the highest since April 2013, compared with 4.9 months at the end of the prior month.

Less than a five months’ supply is considered a tight market, the Realtors group has said.

Sales of existing singlefamily homes decreased 0.2 percent to an annual rate of 4.04 million. Purchases of multifamily properties - including condominiums and townhouses - fell 1.8 percent to a 560,000 pace.

Purchases declined in two of four regions, led by an 11.3 percent drop in the Northeast. Sales rose in the South and West.

Of all purchases, cash transactions accounted for about 35 percent, the report showed.

Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 16 percent of the total.

“Prices are rising much faster than people’s incomes,” said Lawrence Yun, chief economist for the National Association of Realtors. “The biggest factor is affordability,” which has been declining. Faster job growth can help ease the sting of higher prices and borrowing costs, he said.

Sales of previously owned homes, tabulated when a purchase contract closes, have recovered from a 13-year low of 4.11 million in 2008, three years after a record 7.08 million houses were sold in 2005. Still, higher prices and borrowing costs have put properties out of reach forsome Americans, helping explain a slowdown in sales since July.

Winter weather and snowstorms in parts of the U.S. have made it difficult to gauge the true health of housing and other indicators such as retail sales and manufacturing. February ended with its coldest final week since 2003, according to Berwyn, Pa.-based weather data provider Planalytics Inc. The second week of the month was the snowiest such period since 2007.

Other data have shown new projects have been slow to get underway because of the bad conditions, also depressing builder sentiment. Housing starts were little changed in February at a 907,000 annualized rate, Commerce Department data showed this week. In November, new constructionwas running at a 1.1 million pace.

The National Association of Home Builders/Wells Fargo index of builder confidence rose less than forecast in March.

Warmer temperatures may revive construction in coming months, and some companies are more upbeat. Among those is Hovnanian Enterprises Inc., New Jersey’s largest homebuilder.

“We believe this is a temporary pause in the industry’s recovery,” Chief Executive Officer Ara Hovnanian said in a statement March 5. “Based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery.” Information for this article was contributed by Ainhoa Goyeneche of Bloomberg News.

Business, Pages 23 on 03/21/2014

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