Existing Home Sales Rise in March

There have been some signs lately about the housing market crawling its way back slowly after it bottomed out last July. According to the National Association of Realtors (NAR), sales of existing homes in the United States rose 3.7% in March to a seasonally adjusted annual rate of 5.1 million.

These results were better than expected because many experts and economists had predicted that number to be close to 5 million units. In February, 4.88 million existing homes were sold, while the initial estimate was 4.92 million units. Although March's rate was 24.8% below the November 2009 peak of 6.49 million units, the fact that existing home sales have increased in six of the past eight months is being considered a small but sure step towards the U.S. housing market recovery.

In March, three of the four U.S. housing regions saw an increase in existing home sales. The South led the way with an 8.9% increase in resales to an annual level of 1.99 million, followed by a 3.9% increase in the Northeast to an annual level of 800,000, and 1% in the Midwest to an annual rate of

1.06 million. Sales of existing homes fell 0.8% in the West to an annual level of 1.25 million. 

Sales of single-family homes grew by 4% in March to a seasonally adjusted annual rate of 4.45 million units. Sales of condos rose 1.6% to an annual rate of 650,000. Some housing analysts argue that sales of existing homes in March of this year were lower than the 5.44 million units sold in March 2010. Although it is true that sales were at a higher level between the months of March and June 2010, these elevated levels were due to buyers rushing to take advantage of the federal tax credits for homebuyers.

According to a NAR survey, first-time buyers purchased 33% of homes in March, compared with 34% in February. Cash sales accounted for 35% of the market share in March, up from 33% in February. Investors accounted for 22% of sales, up from 19% in February. The remaining 45% were purchased by repeat buyers.

The improving sales pattern is likely to continue, said NAR Chief Economist Lawrence Yun. "Existing-home sales have risen in six of the past eight months, so we're clearly on a recovery path," he said. "With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain-primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percentage of income have been at record lows."

"Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago-before the loose lending practices that created the unprecedented boom-and-bust cycle," Yun explained. 

NAR's housing affordability index shows that the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13% of gross household income, the lowest since records began in 1970. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84% in March, down from 4.95% in February.

The inventory of existing homes decreased to 8.4 months in March, as compared to 8.5 months in February. If sales continue at this rate for the rest of 2011, this year will be better than 2010 for existing home sales.