US homebuyers flooded back into the real estate market in March, pushing up sales and prices at the start of the spring buying season.
Sales of existing homes jumped 6.1 percent last month to a seasonally-adjusted annual rate of 5.19 million, the National Association of Realtors said on Wednesday, April 22.
Home purchases recovered after setting a weak pace in January and February, during an extremely cold and snow-filled winter which affected the industry. Relatively low mortgage rates and robust hiring has raised the expectation that home sales will improve, after slipping slightly last year.
But the recent surge in sales has yet to cause a meaningful increase in listings. The market has only 4.6 months of supply, compared to six months in what economists consider to be a healthy market. The limited supplies have caused prices to rise at a level that hurts affordability. Median home prices increased 7.8 percent over the past 12 months, to $212,000.
“This sets up a tension between rising demand and limited supplies. In order to build on the current sales momentum, more houses need to be listed,” said Richard Moody, chief economist at Regions Financial.
The real estate industry is still recovering from a housing crash that triggered the 2008 financial crisis, and dragged down prices through 2012.
“While improving labor market conditions have fostered sturdier income growth and first time buyers are coming back…we nonetheless continue to harbor concerns that lean inventories could pull the plug on a potentially promising spring selling season,” Moody continued.
But the sluggish pace of the nearly six-year recovery has kept wages from rising significantly, putting home values out of reach for many buyers. Many potential sellers are still underwater on their mortgages, meaning that they owe more than their home could fetch in a sale, and thus restricting the number of listings.
In March, the sales rate topped 5 million for the first time this year—suggesting that sales should improve from the total in 2014. In a healthy market, economists say, sales would average roughly 5.5 million a year.
Home-buying improved in all four geographic regions last month, with the largest gains from the Northeast and Midwest areas.
First-time buyers in the market accounted for 30 percent of March purchases, up from 29 percent in February. Yet, in a healthy market, first-time buyers usually compose about 10 percent of sales.
The sales figures reinforce several other indicators that suggest a strengthening housing sector.
Redfin, a real estate brokerage, reported last week that sales jumped 10.1 percent in March compared with 12 months earlier. It also found that the majority of homes in San Francisco sold for more than $1 million last month, while Denver homes were staying on the market for just six days. Fewer homes nationwide were listed for sale in March, limiting sales growth overall.
With relatively low mortgage rates and prices climbing roughly four times the pace of wage growth, job gains in the market are key. Along with the recent surge, there are an additional 3.1 million people in the workforce—a factor economists take into consideration when predicting home sales levels, increasing their confidence within the real estate sector.
(With reports from Associated Press)
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(LA Weekend April 25-28, 2015 Sec. D pg.1)
