Sales of previously owned homes fell in March for a third consecutive month as rising prices and a lack of inventory discouraged would-be buyers.
Closings, which usually take place a month or two after a contract is signed, fell 0.2 percent to a 4.59 million annual rate, the lowest level since July 2012, the National Association of Realtors reported today in Washington. Purchases were down 8.5 percent compared with the same month last year before adjusting for seasonal patterns.
Property values have climbed faster than wages, putting ownership out of reach for some Americans. Harsh winter weather in January and February also probably kept some properties off the market, contributing to a lack of supply that has further stoked price increases.
“The housing recovery is on pause,” said Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut, which is among the top home-sales forecasters over the past two years, according to data compiled by Bloomberg. “There may be some weather impact, but it doesn’t seem like that’s what’s really holding things back. What does seem to be holding things back is this shortage of inventory.”
Stocks rose a sixth day, with the Standard & Poor’s 500 Index capping its longest rally since September, as health-care shares surged amid a $45.7 billion bid for Allergan Inc. and earnings from Netflix Inc. to Harley-Davidson Inc. topped estimates. The S&P 500 climbed 0.4 percent to 1,879.55 at the close in New York.
The median forecast of 75 economists surveyed by Bloomberg called for sales to slow to a 4.56 million annual rate. Estimates ranged from 4.5 million to 4.85 million. February’s pace was unrevised at 4.6 million.
Demand slackened in parts of the country such as the West, where property values have rebounded too rapidly, while other regions are still trying to dig out from the unusually harsh winter that prevented buyers and sellers from venturing into the market, Lawrence Yun, NAR chief economist, told reporters as the figures were released. Nonetheless, the relative stabilization over the past two months is a hopeful sign that sales will strengthen in coming months, when purchases typically pick up.
“Sales may be stabilizing,” said Yun. “I do expect some spring bounce.”
The median price of an existing home climbed 7.9 percent from March 2013 to $198,500, today’s report showed. The appreciation was led by a 12.6 percent year-to-year advance in the West, while the Northeast lagged behind with a 3.2 percent increase.
Sales were mirror images of prices, with the biggest 12-month drop coming in the West at 13.5 percent, and the smallest in the Northeast, with a 4.4 percent decrease.
The number of houses for sale at the end of last month rose to 1.99 million compared with 1.93 million a year earlier. At the current pace, it would take 5.2 months to sell houses compared with 5 months at the end of February. That still constitutes a tight market that favors sellers over buyers, Yun said.
“Prices are continuing to rise because we have a shortage of inventory,” Yun said in the press conference. “We do need to see a moderation in price growth because affordability will impact sales negatively.”
Another report today showed house prices rose 6.9 percent in the 12 months through February, the smallest gain in a year, in a sign that the housing market’s recovery is cooling. Prices climbed 0.6 percent on a seasonally adjusted basis from January, the Federal Housing Finance Agency said.
While existing home sales have improved since hitting a low of 3.45 million in July 2010, rising interest rates and higher prices have pushed transactions down from a recent high of 5.38 million reached in July 2013.
The average rate on a 30-year, fixed mortgage fell to a two-month low of 4.27 percent in the week ended April 17. A year ago, the rate averaged 3.41 percent, according to Freddie Mac in McLean, Virginia.
Work began on fewer new homes than forecast in March, Commerce Department data showed last week. Builders also have fewer houses in the pipeline, with the number of permits declining 2.4 percent last month.
Housing’s slow recovery is being felt by mortgage lenders, many of which have cut staffing. Since the beginning of the year, Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. have eliminated workers in their mortgage divisions.
At PNC Financial Services Group, loans used to buy homes fell to $1.9 billion in the first quarter compared to $4.2 billion a year earlier, Chief Financial Officer Rob Reilly said. Total revenue for the Pittsburgh-based bank could fall this year in part because of reduced demand for mortgages, he said.
“We announced expense reductions in residential mortgage during the fourth quarter of last year and we have fully captured those savings,” Reilly said on an April 16 earnings call. “In this environment, we will remain focused on disciplined expense management.”