March existing home sales disappoint due to limited inventory, prices continue to rise

By Gretchen Wegrich

A constricted inventory caused existing-home sales to fall in March, pushing home prices higher as mortgage rates continue to remain near record lows, reported the National Association of Realtors (NAR).

“Buyer traffic is 25 percent above a year ago when we were already seeing notable gains in shopping activity," said NAR chief economist, Lawrence Yun, noting that demand is exceeding supply in the current market.

Yun added, "In the same timeframe housing inventories have trended much lower, which is continuing to pressure home prices. The good news is home construction is rising and low mortgage rates are continuing to keep affordability conditions at historically favorable levels. The bad news is that underwriting standards remain excessively tight, while renters are getting squeezed by higher rents."

Total existing-home sales declined 0.6 percent to a seasonally adjusted annual rate of 4.92 million during March, from 4.95 million in February. Existing home sales remain 10.3 percent higher than sales during March 2012.

During the same period, total housing inventory increased 1.6 percent to 1.93 million existing homes for sale, a 4.7 month supply based on the current rate of sales. This is a .01 increase over February’s supply.

“The inventory improvement last month results from a seasonal gain, but conditions continue to broadly favor sellers,” noted Yun, adding, “We need a housing supply of over 6 months to have a generally balanced market between home buyers and sellers, but it's unlikely we'll get there without greater increases in housing construction."

The national median existing-home price for all types of housing was $184,300 in March, an 11.8 percent increase over March 2012. The March increase is the strongest since November 2005, when home prices increased 12.9 percent year over year. The previous time there were 13 consecutive months of year-over-year price increased was May 2005-May 2006.

Distressed homes –including foreclosures and short sales –made up 21 percent of March sales, a 4 percent decrease from February and an 8 percent year-over-year decrease. On average, foreclosures sold for 15 percent below market value in March, while short sales saw an average discount of 13 percent.

Freddie Mac reported that the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.57 percent in March from 3.53 percent in February; during March 2012, the same rate was elevated to 3.95 percent.

"The typical home sold in March was on the market for one month less than it took to sell a year ago," said NAR President Gary Thomas, a broker-owner, noting that homes are now selling much faster.  "Multiple bidding is becoming more common, and more homes are selling above the asking price, so buyers need to move quickly and follow their Realtor^®'s advice for contingencies when making contract offers."

During March, the median time on market for all homes was just 62 days, down from 74 days during February and 32 percent below the 91 days in March 2012. Short sales remained on the market for a median of 81 days, foreclosures sold in 46 days and non-distressed homes sold in 66 days. Thirty-seven percent of all homes on the market in March sold in less than one month.

First time home buyers accounted for fewer of home purchases in March; just 30 percent, compared to 33 percent in March 2012.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.