The 3% drop in March is more than expected, eroding hopes that the real estate market had reached bottom.
Existing home sales declined 3% in March according to an Apr. 23 report by the National Assn. of Realtors, falling short of expectations and offering new indications that the real estate market may not have reached bottom.
Existing home sales declined to a seasonally adjusted rate of 4.57 million units in March, down from a 4.71 million rate in February. The sales were 7.1% lower than in March 2008. Sales had been expected to fall to an annual pace of 4.7 million units, according to Thomson Reuters (TRI).
The February rate was revised slightly downward from last month’s report. The February report had shown an uptick in home sales, leading to hopes that the real estate market had been bottoming out.
“The share of lower priced home sales has trended up, indicating a return of many first time buyers, which we also see in a parallel member survey,” Lawrence Yun, NAR chief economist, said in a news release. “Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans.”
Distressed Properties: 50% of March Sales
First time buyers accounted for 53% of all transactions and are responding to low mortgage interest rates and tax credits, the real estate group said.
National median prices for all housing types rose 4.2% from February to March, to $175,200. That remains 12.4% below the level of a year earlier. “Distressed properties” made up just over half of all transactions in March, the group said.
Paul Dales, U.S. Economist at Capital Economics in Toronto, said the March decline “is probably just noise rather than a renewed downward trend.” Dales added, “Admittedly, around 50% of sales are now related to distressed properties, which is hardly a sign of strength. But at least these sales are helping to reduce the inventory overhang.”