Spurred by bargain prices and a new $8,000 federal tax credit for first-time buyers, more Americans purchased homes in February, compared to the previous month.
According to data released this morning by the National Association of Realtors (NAR), existing-home sales moved upward 5.1% in February to a seasonally adjusted pace of 4.72 million units. On an annual basis, though, existing-home sales still remain 4.6% below February 2008, however.
“It appears most of the increase in buyer traffic occurred in the latter part of the month after the $8,000 first-time buyer tax credit was put in place,” said Charles McMillan, the group’s president and a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “At the same time, mortgage purchase applications have risen, so we expect to see sales picking up around late spring.”
That’s coming from record-low interest rates, which currently stand at 4.98% for a 30-year fixed rate conforming loan, according to Freddie Mac’s weekly survey.
All these factors are persuading first-time buyers to jump into the market, contributing half of all existing home sales last month, according to Lawrence Yun, NAR’s chief economist. Additionally, these buyers appear to be snapping up the “distressed assets," i.e., homes that are priced to sell because of bank ownership or a pending foreclosure. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” Yun said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price,” which dipped 15.5% on an annual basis to $165,400 in February for all existing homes.
That’s a bit of a mixed bag for builders, whose new homes don’t need any more price pressure. But they do need buyers to purchase these existing homes and thereby bring down the glut of homes available on the market. According to NAR, there were 3.8 million existing homes on the market in February, which translates into 9.7 months of supply.
Alison Rice is senior editor, online, at BUILDER magazine.