The Doldrums Continued for Existing Home Sales in February — But I Expect It Will Pick Up as the Weather Warms

We have some great friends from Germany and have sailed with them many times over the past two decades in the U.S. and British Virgin Islands and other Southern locations. I will never forget the time when we were sailing back from the BVIs to the USVIs and the wind died. Completely. The sails on the boat were flat. It was eerily silent on the water. Spooky quiet as some sailors would say. They call that the doldrums. You just kind of float around based on currents, and the sea is totally flat. I think the doldrums have occurred the past three months in housing sales in the U.S.

Just like a sailboat with no wind, existing home sales moved little in February as reported by the National Association of Realtors® (NAR). Housing sales were in the doldrums. Some of the flatness can be blamed on severe weather last December and January, as decreased signed contracts in those months become fewer closings in February.

Home sales rang in at a seasonally-adjusted annualized rate (SAAR) of 4.60 million dwellings, down slightly from the 4.62 million SAAR in January, but off substantially from the 4.95 million pace seen a year ago. The February median price of $189,000 was up 9.1 percent from a year ago, but that may be misleading given the surge in higher-priced home sales.

The following tables show the 12-month moving averages of sales and price along with raw numbers. While sales have slipped year-over-year, they have done so at the low point of annual sales activity.

3-24-14 graph
Other details from the NAR release included:

  • All-cash closings made up 35 percent of the transactions in February 2014, up from 32 percent a year ago and 33 percent in the prior month
  • Investors made up one-in-five purchases (21 percent), similar to the 22 percent a year ago and the 20 percent this January. Three-out-of-four investors (73 percent) paid cash.
  • Distressed properties (short sales and foreclosures), accounted for 16 percent of closings in February 2014, and while similar to the 15 percent in the preceding month, were down significantly from the 25 percent level posted 12 months ago.
  • Just 5 percent of sales were short sales, which sold at an average discount of 11 percent compared to non-distressed transactions
  • Foreclosures tallied for 11 percent of sales with a 16 percent average discount to non-distressed properties
  • Inventory of listings available for sale edged up to 2.0 million homes – equaling a 5.2 month inventory. Six months is considered by many to be normal.
  • NAR’s chief economist noted that rising prices have resulted in a $4 trillion increase in housing wealth in the past 36 months
  • One-out-of three of the homes sold in February (34 percent) were on the market less than one-month. The median time on the market for all sales was 62 days, with foreclosures selling in 60 days, non-distressed properties in 61 days and short sales at 94 days.

To read the entire press release from NAR (which I strongly encourage) click http://www.realtor.org/news-releases/2014/03/february-existing-home-sales-remain-subdued

I stick with forecast that the U.S. will end up at a greater rate by year-end 2014. As stated before, as the temperature rises this Spring, so will job growth and housing sales. Just like the sail boat trip in the Virgin Islands, the wind will eventually return.

Ted

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