US existing home sales decline by 7.1% in February
By Staff Writer
Mar 22, 2016 10:44 AM EDT
Mar 22, 2016 10:44 AM EDT
Sales of existing homes in February declined, reflecting poor demand in housing sector amid higher prices and weak inventory. Sales of pre-owned houses dropped 7.1% during February to a rate of 5.08 million from 5.47 million in the previous month. But, sales still remains 2.2% higher than the prior-year period.
Lawrence Yun, a chief economist at National Association of Realtors, said that the break in bond signings during January along with stock market volatility might have contributed to the sales fall. But, Yun considers affordability and supply as the main problem for poor sales. In addition, selecting a suitable home at an affordable cost seems more challenging for many buyers, he added.
Yun continued, "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." The average price for existing homes was $210,800 in February 2016, an increase of 4.4% from $201,900 in the previous year period.
Net housing inventory during February rose 3.3% to 1.8 million pre-owned houses available for sale. Cash sales accounted for 25% of transactions during February, a decrease of 26% in January. Nearly 18% of home sales in February came from individual investors, who are key contributors of cash sales.
According to Yun, sales from individual investors increased over the recent period following a drop to as small as 12% of sales during August 2015. He added that there seems to be a change in trend, where investors purchased small budget homes and converted them into rentals. The share of new buyers dropped to 30% during February from 32% in January, up from 29% in the previous year period.
THE WALL STREET JOURNAL quoted Joel Naroff, an economist at Naroff Economic Advisors, who said that a normal market will have nearly six month's output. According to Joel, without sufficient supply, it is difficult to sell homes and that supply is considered to be the key risk factor with regard to the housing sector.
Last month, market experts had anticipated a decrease of 2.8% in the US existing homes sale. Housing sector across the nation experienced a steep fall, with a 17.1% fall in the US Northeast. This slowdown in the US housing sector impacted S&P 500 index, which dropped immensely following the release of the data. Robust growth in the labour market continues to propel housing sector amid poor foreign demand and strong US currency, as reported by Reuters.
The housing sector is facing many challenges including weak demand and oversupply. Experts hope housing market will rebound in the near future.
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