Sales of existing homes declined slightly in March but prices rose, suggesting that the housing market is still struggling to find its footing after months of decline.
In its monthly report, the National Association of Realtors® said that combined sales of existing homes declined 3.0 percent in March on a seasonally adjusted basis to an annual rate of 4.57 million units from the month before. At the same time, the median sales price rose to $175,200, from $168,200 in February.
The sales decline was evident in all major home categories identified, including single-family homes, townhouses, condominiums and co-ops. Existing home sales have dropped at an annual rate of over half a million units since September 2008.
The NAR's chief economist, Lawrence Yun, said the market appears to be stabilizing with modest monthly ups and downs, and that first-time buyers are driving the market.
"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," he said. "Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans."
First-time buyers increasing
First-time buyers appear to be moving into the market in strong numbers, attracted by low interest rates and home prices. The NAR reported that first-time buyers made up 53 percent of all transactions in March, well above their historic norms.
"Over the past decade, it's (first-time buyers) averaged about 40 percent of the market," said Walt Molony, a spokesman for the NAR. "But it's really not surprising, given the current environment."
The high rate of first time buyers is partly influenced by seasonal factors. Even so, their percentage could go even higher still in coming months, given that March's results are based largely on contracts offered before the new $8,000 first-time home buyer tax credit became available.
Tax credit effect yet to be felt
"Buyer traffic has been rising, and real estate offices are getting phone inquires about the tax credit," said Yun. "By early summer we should be seeing a positive impact on home sales from record-low mortgage interest rates in addition to the stimulus provisions."
NAR President Charles McMillan said first-time buyers are crucial at this stage of a housing recovery. "The housing market always heals from the bottom up," he said, "And with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down, according to their needs."
The increase in median sales prices marks the second consecutive month that prices have risen, following seven straight months of declines dating back to July. However, those increases may have been influenced by a voluntary moratorium on foreclosures adopted by many large lenders for the first two months of the year. With the moratorium lifted, the new influx of foreclosed homes could again exert downward pressure on housing prices.
