Hope seen, despite home sales downturn
Realtors say home resales fell 3% in March, but analysts point to signs of a stabilizing market.
NEW YORK (CNNMoney.com) -- Sales of existing homes fell in March, according to an industry report released Thursday, but analysts say the housing market is showing signs of stabilization.
The National Association of Realtors said that existing home sales fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.
March sales were down 7.1% year over year, and came in weaker than the 4.65 million rate forecast by analysts surveyed by Briefing.com.
Despite last month's decline, existing home sales appear to be stabilizing, according to Ian Shepherdson, economist at High Frequency Economics.
"Sales are volatile month-to-month, but the trend appears to be flattening off," Shepherdson said in a research note.
Single family home sales, which are considered the core of the market, fell at a 10% annualized rate in the first quarter of 2009, after a 17.4% drop in the last three months of 2008. At the current sales pace, existing-home sales will be down "only" 2% in the second quarter, according to Shepherdson.
First-time buyers made up 53% of existing home sales in March. Charles McMillan, NAR's president, said first-time buyers are "crucial" to a recovery in the overall housing market.
"The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down," McMillan said in a statement.
Meanwhile, sales of "distressed properties" accounted for over half of all transactions in March. Foreclosed homes typically sell for 20% less than traditional homes, according to NAR.
"Clearly foreclosure activity is driving the marketplace," said Adam York, an economist at Wachovia Economics Group, in a research report. "Buyers are clearly looking for 'bargains,' if they are looking at all."
Existing home sales in the West declined 4.2% in March. Sales in the South and the Northeast also fell, while sales in the Midwest were unchanged.
The national median existing-home price was $175,200 in March, up 4.2% from $168,200 in February. Still, the median existing-home price was down more than 12% since March 2008, when it was $200,100.
The total number of existing homes on the market at the end of March fell 1.6% to 3.74 million units. At the current sales pace, it would take an estimated 9.8 months to sell that inventory of properties. That's up slightly from 9.7 months in February and January.
"The inventory overhang has stabilized too," Shepherdson said. But the number of existing homes on the market remains historically high, and prices will continue to fall rapidly "for the foreseeable future," he said.