Home sales fall to lowest level in 9 years

By Derek Kravitz
AP Real Estate Writer

Washington — Fewer Americans bought previously occupied homes in February, and those who did, bought them at steep discounts.

The weak sales and rise in foreclosures pushed home prices down to their lowest level in nearly nine years.

The National Association of Realtors reported Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That’s down 9.6 percent from 5.4 million in January. The pace is far below the 6 million homes a year economists say represents a healthy market.

Nearly 40 percent of the sales last month were either foreclosures or short sales, when sellers accepts less than they owe on the mortgage.

The median sales price fell 5.2 percent to $156,100, the lowest level since April 2002.

“This information suggests that value investors are entering the market, possibly a sign that home sales and construction are nearing a bottom,” said Joseph A. LaVorgna, chief U.S. economist for Deutsche Bank Securities. “Lower prices are certainly a factor behind the opportunistic buying.”

Housing has been weak for some time. Millions of foreclosures have forced down home prices, and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further.

High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.

The median price of a new home is now 45 percent more than the median price for a previously occupied home, the Realtors group reported. A more normal difference is about 15 percent, an indication that old homes on the market are being sold at comparatively cheap, and affordable, levels.

The number of first-time homebuyers rose to 34 percent of the market, partly because of rising rents. A more healthy level of first-time homebuyers is about 40 percent, according to the trade group.

One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers rose to 3.49 million units in February. It would take 8.6 months to clear them off the market at the February sales pace. Most analysts say a six-month supply represents a healthy supply of homes.

“It is unlikely that home prices can recover on a sustained basis until the inventory-to-sales balance improves and the number of distressed properties is significantly reduced,” said Steven A. Wood, chief economist with Insight Economics.

Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.

For February, sales fell in all four regions of the country, by 12.2 percent in the Midwest, 10.2 percent in the South, 8 percent in the West and 7.2 percent in the Northeast.