March 2014 Existing Home Sales Down 7.5 Percent From a Year Ago — Median Price Up 7.9 Percent: Weather, Lending Regulations and Affordability

March existing home sales were just released by the National Association of Realtors® (NAR), showing a 7.5 percent decline in sales from March 2013. Sequentially from February, sales were essentially flat, down just 0.2 percent. The Seasonally Adjusted Annualized Rate (SAAR) as of March 2014 was 4.59 million home sales. This was the lowest rate of sales since July 2012. Median price for March was a reported $198,500, an increase of 7.9 percent in the prior 12 months.

After struggling through challenging winter weather since December that no-doubt diminished newly signed contracts, the March result was not surprising. Compounding this may be the new regulations of Qualified Mortgages which likely are restricting borrower qualifications in mortgage loan applications and general mortgage loan availability. Throw in a decline in general affordability, and the housing market in recent months makes economic sense.

The following graph shows the monthly median home prices and sales on a SAAR as reported by NAR.

4-22-14 graph1

To mute some of the month-to-month noise that occurs in the data, better illustrate trends and remove known seasonality in median prices, the following graph uses the same data as above, but on a 12-month moving average basis. The rate of decline in sales slowed in March (on the a 12-month moving average basis), and median prices continued rising.

4-22-14 graph2

Other information and statistics in the March existing homes sales release from NAR included:

  • 1.99 million homes were included in the inventory at the end of March, a gain of 4.7 percent from a year ago, equating to 5.2 months of supply at the current sales rate. On a seasonally-adjusted basis, months inventory was 5.4 months.
  • 14 percent of the sales were distressed: 10 percent foreclosures and 4 percent short sales. A year ago, foreclosures made up 13 percent of all transactions while short sales tallied 8 percent
  • The typical foreclosure sold at an average discount of 18 percent less than other non-distressed transactions in March 2014, compared to a 15 percent discount a year ago
  • Short sales in March 2014 sold at a 12 percent discount to non-distressed real estate, very similar to the 13 percent discount in March 2013
  • All-cash sales made up 33 percent of all closings compared to 30 percent a year ago
  • Investors bought 17 percent of all homes sold in March 2014 versus one-in-five home sales (19 percent) in March 2013. Investors acquired 21 percent of all sales in March 2012. Seven-out-of 10 investors (71 percent) paid all cash in March 2014
  • The percentage of first time homebuyers at 30 percent in March 2014, was up slightly from 28 percent a year ago
  • Homes stayed on the market a median 55 days, less than the 62 days in February 2014 and March 2013. Short sales took the longest to close at 112 days. Foreclosure days-on-market equaled the overall market median of 55 days, while non-distressed properties median was 53 days. Slightly more than one-third of all homes (37 percent) were on the market less than one month.

To read the entire NAR press release, click

I again stick with my original estimate that, as the weather warms, likewise will housing sales. My forecast is that 2014 will end up with a 4 to 6 percent increase in total existing homes sales, and median prices will have gained 5 to 7 percent. Why am I sticking with that forecast? Job growth. In the prior 12 months, the U.S. added 2.246 million net new jobs, or 187,200 per month average for the period. On a 12-month average basis, jobs increased 1.70 percent in the prior 12 months – the largest rate of growth since prior to the recession.

For this forecast to come true, however, April needs to show a burst of activity.

Time will tell.


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