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After increasing to the highest annual rate in six months, existing-home sales tumbled in February amidst unshakably low supply levels and steadfast price growth in several sections of the country, according to the National Association of REALTORS®. Led by the Northeast and Midwest, all four major regions experienced sales declines in February.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month’s large decline, sales are still 2.2 percent higher than a year ago.

Lawrence Yun, NAR chief economist, says existing sales disappointed in February and failed to keep pace with what had been a strong start to the year. “Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” he says. “The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February’s lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”

According to Yun, job growth continues to hum along at a robust pace, but there appears to be some uneasiness among households that the economy is losing some steam. This was evident in NAR’s latest quarterly HOME survey – released earlier this month – which revealed that fewer respondents believe the economy is improving, and a smaller share of renters said that now is a good time to buy a home.

“The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers,” says Yun.

The median existing-home pricefor all housing types in February was $210,800, up 4.4 percent from February 2015 ($201,900). February’s price increase marks the 48th consecutive month of year-over-year gains.

Total housing inventoryat the end of February increased 3.3 percent to 1.88 million existing homes available for sale, but is still 1.1 percent lower than a year ago (1.90 million). Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.0 months in January.

All-cash sales were 25 percent of transactions in February, down from 26 percent both in January and a year ago. Individual investors, who account for many cash sales, purchased 18 percent of homes in February (17 percent in January), matching the highest share since April 2014. Sixty-four percent of investors paid cash in February.

“Investor sales have trended surprisingly higher in recent months after falling to as low as 12 percent of sales in August 2015,” adds Yun. “Now that there are fewer distressed homes available, it appears there’s been a shift towards investors purchasing lower-priced homes and turning them into rentals. Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.”

The share of first-time buyers fell to 30 percent in February (matching the lowest share since November 2015) from 32 percent in January, but is up from 29 percent a year ago. First-time buyers in all of 2015 represented an average of 30 percent.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage declined from 3.87 percent in January to 3.66 percent in February, which is the lowest since April 2015 at 3.67 percent. The average commitment rate for all of 2015 was 3.85 percent.

Properties typically stayed on the market for 59 days in February, a decrease from 64 days in January and below the 62 days in February 2015. Short sales were on the market the longest at a median of 126 days in February, while foreclosures and non-distressed homes each took 57 days. Thirty-five percent of homes sold in February were on the market for less than a month.

NAR President Tom Salomone says many REALTORS®are saying instances of multiple bids and affordable homes going under contract quickly are common in their markets. “With low supply this spring buying season, it’s easy for buyers to get discouraged when their offer is rejected in favor of a higher bid,” he says. “That’s why it’s important for buyers to stay patient and work with a REALTOR® to develop a negotiation strategy that ensures success without overstretching their budget.”

Matching the highest share since May 2015, distressed sales– foreclosures and short sales – rose slightly to 10 percent in February, up from 9 percent in January but down from 11 percent a year ago. Seven percent of February sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in February (13 percent in January), while short sales were discounted 16 percent (12 percent in January).

Single-family and Condo/Co-op Sales

Single-family home sales fell 7.2 percent to a seasonally adjusted annual rate of 4.51 million in February from 4.86 million in January, but are still 2.0 percent higher than the 4.42 million pace a year ago. The median existing single-family home price was $212,300 in February, up 4.3 percent from February 2015.

Existing condominium and co-op sales decreased 6.6 percent to a seasonally adjusted annual rate of 570,000 units in February from 610,000 in January, but are still 3.6 percent above February 2015 (550,000 units). The median existing condo price was $198,900 in February, which is 5.1 percent above a year ago.

Regional Breakdown

February existing-home sales in the Northeast descended 17.1 percent to an annual rate of 630,000, but are still 5.0 percent above a year ago. The median price in the Northeast was $239,700, which is 0.8 percent below February 2015.

In the Midwest, existing-home sales sank 13.8 percent to an annual rate of 1.12 million in February – unchanged from February 2015. The median price in the Midwest was $162,700, up 6.3 percent from a year ago.

Existing-home sales in the South decreased 1.8 percent to an annual rate of 2.20 million in February, but are still 3.3 percent above February 2015. The median price in the South was $186,400, up 5.0 percent from a year ago.

Existing-home sales in the West declined 3.4 percent to an annual rate of 1.13 million in February, but are still 0.9 percent higher than a year ago. The median price in the West was $308,800, which is 7.0 percent above February 2015.

“February’s existing home sales report may be offering a look from the rear view mirror of a road that is changing,” says Quicken Loans Vice President Bill Banfield. “Looking forward, rates have dropped in 2016, which helps overall affordability, and purchase activity has been stronger than the prior year. However, the lack of supply will continue to constrain sales and may push prices up faster than buyers will like.”

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