March 21, 2011 (Chris Moore)
Sales of previously owned U.S. homes plunged in February and prices hit their lowest level in nearly nine years according to the National Association of Realtors (NAR). Existing home sales dropped 9.6 percent in February compared to January and home prices dropped 5.2 percent compared to February 2010.

NAR reported that existing home sales, which includes completed transactions of single-family homes, townhomes, condominiums, and co-ops, dropped to a seasonally adjusted annual rate of 4.88 million homes in February, compared to revised 5.40 million in January and 2.8 percent below the 5.02 million in February 2010. Economists polled by Reuters had expected February sales to fall 4.0 percent to a 5.15 million-unit pace.

“Housing affordability conditions have been at record levels and the economy has been improving, 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,” Lawrence Yun, NAR chief economist said. “This tug and pull is causing a gradual but uneven recovery. Existing-home sales remain 26.4 percent above the cyclical low last July.”

First-time buyers purchased 34 percent of homes in February, up from 29 percent in January; but down from 42 percent in February 2010. All-cash sales were a record 33 percent in February, up from 32 percent in January and up from 27 percent a year earlier.

Investor sales activity dropped to 19 percent of sales compared to 23 percent in January.

The median existing home sales price for all housing types in the U.S. declined to $156,000 in February. Distressed home sales continued to increase as they accounted for 39 percent market share in February, up from 37 percent in January and up from 35 percent a year earlier.

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

Regionally, existing-home sales in the Northeast fell 7.2 percent to an annual pace of 770,000 in February and are 8.3 percent below February 2010. The median price in the Northeast was $230,200, down 9.5 percent from a year ago.

Existing-home sales in the Midwest dropped 12.2 percent in February to a level of 1.01 million and are 9.0 percent lower than a year ago. The median price in the Midwest was $122,000, which is 5.4 percent below February 2010.

In the South, existing-home sales fell 10.2 percent to an annual pace of 1.84 million in February but are unchanged from February 2010. The median price in the South was $134,600, down 3.9 percent from a year ago.

Existing-home sales in the West declined 8.0 percent to an annual level of 1.26 million in February and are 2.4 percent below a year ago. The median price in the West was $190,000, which is 5.2 percent below January 2010.

At February’s sales pace, the supply of existing homes on the market rose to 8.6 months’ worth from 7.5 in January. A supply of between six and seven months is generally considered ideal, with higher readings pointing to lower house prices.

Tags: NAR, existing home sales, median home price, single-family homes, townhomes, condominiums, co-ops, housing affordability