Sales of previously owned U.S. homes dropped more than forecast in February after reaching the second-highest level since 2007 as low inventory levels continue to limit progress in housing.
Closings on existing homes, which usually take place a month or two after a contract is signed, decreased 7.1 percent to a three-month low 5.08 million annual rate after a 5.47 million pace in January, the National Association of Realtors said on Monday. Sales were weaker than the most pessimistic forecast in a Bloomberg survey.
Faster growth in residential real estate is being hampered by a limited selection of available properties that has led to higher offering prices. While mortgage rates are attractive, affordability remains an issue for potential first-time and lower-income buyers whose participation would help broaden the marketâ€™s improvement.
â€œThe recovery in housing continues to held back by a chain of factors,â€ Nancy Vanden Houten, a senior analyst at Stone & McCarthy Research Associates in Princeton, New Jersey, said before the report. â€œIt seems like thereâ€™s certainly upside for the housing sector, but I would be surprised if it were to suddenly take off.â€
The median forecast of a Bloomberg survey of 70 economists called for 5.31 million, with estimates ranging from 5.15 million to 5.53 million.
Purchases of existing homes decreased in all four regions last month, led by a 17.1 percent slump in the Northeast and a 13.8 percent decline in the Midwest.
While a blizzard on the East Coast may have played a role in the drop in closings, the Realtors group said lack of supply and affordability are the bigger restraints.
â€œThe question is, is this the beginning where homebuyers are beginning to show resistance to higher prices or is this a one-month fluke in the data,â€ Lawrence Yun, NAR chief economist, said in a news conference as the figures were released. â€œNow we are seeing fewer renters interested in buying. Theyâ€™re indicating affordability is an issue.â€
Compared with a year earlier, purchases increased 6.4 percent in February on an unadjusted basis.
The number of existing properties on the market fell 1.1 percent to 1.88 million in February from 1.9 million a year earlier. At the current pace, it would take 4.4 months to sell those houses compared with 4 months at the end of January. It was 4.6 months in February 2015. The median time a home was on the market decreased last month to 59 days from 64 days in January.
In general, tight inventory levels have helped boost the values of homes on the market. The median price of an existing home rose to $210,800 from $201,900 in February 2015.
Higher prices are keeping homes out of reach for some first-time buyers. They accounted for 30 percent of all purchases, the report showed, compared to the 40 percent that is considered more typical.
Cash transactions accounted for about 25 percent of all purchases in February, according to the report. Sales of distressed property, including foreclosures, accounted for 10 percent of the total.
Existing home sales, which are tallied only when purchase contracts close, account for more than 90 percent of the residential market. A timelier barometer is new-home purchases, because they are tabulated earlier in the process, when deals are signed.
Some relief from tight inventories may be in store in the months ahead, with a separate Commerce Department report showing last week that new-home construction rose more than forecast in February to a 1.18 million annualized rate.
Previously owned US home sales decline more than forecast