U.S. home sales, prices decline as credit concerns continue

There were 4.9 million sales of existing homes in February, down 9.6%. TD Economics reported the expectation was a 4.9% decline instead. Condo and co-op sales also fell 10% in February.

The median home price slipped 1.1% in February and down 5.2% on a year-over-year basis to reach $156,100.

Prices fell in all regions in February from a year ago

-9.5% to a median of $230,200 in the Northeast
-5.4% in the Midwest to a median of $122,000
-3.9% in the South to a median of $134,600
-5.2% in the West to a median of $190,000.
The positive spin from the realtors is that buying a home continues to be increasingly affordable for those with the means to do so.

“Housing affordability conditions have been at record levels and the economy has been improving,” said Lawrence Yun, chief economist at the NAR. “But home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers.”

Yun pointed out existing-home sales remain 26.4% above a cyclical low in July 2010.

A separate survey by NAR showed an increasing percentage of homes being bought by first time buyers. In February, 34% of homes were purchased by first-time buyers, compared to 29% in January. However, the percentage was 42% in February 2010.

A record was set for all-cash sales, a preferred buying method by Canadian investors, making up 33% of residential real estate transactions in February, compared to 32% in January and 27% a year ago.

“The decline in price corresponds to the record level of all-cash purchases where buyers – largely investors – are snapping up homes at bargain prices,” said Yun. “We’d be seeing greater numbers of traditional homebuyers if mortgage credit conditions return to normal.”

Distressed sales, another target of international buyers lately, also increased in market share to 39% of all sales in February. That was up from 37% in January and 35% in February 2010.

But non-investors have been staying away from buying new property lately. Demand for new homebuyers is being held back by the high unemployment in the U.S. and tight credit conditions, said Christos Shiamptanis, an economist with TD Economics.

“As job growth picks up, new homebuyer demand should increase,” he said. “Until new homebuyers are more engaged in the housing market, the recovery will remain tepid.”

The national average commitment rate for a 30-year conventional fixed-rate mortgage rose to 4.95% in February from 4.76% in January. But NAR President Ron Phipps said that the rates remain very affordable and the issue remains to be credit for borrowers.

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