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Real Estate Outlook: Existing-Sales Decline

The latest existing-home sales figures show a decline once again. This rate is after a gain in January, but is above year ago levels by 8.8 percent.

Lawrence Yun, NAR chief economist, said underlying factors are much better compared to one year ago. “The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” he said. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”

Regionally, the results were mixed. Declines were seen in both the Northeast and West. The Northeast dropped 3.3 percent in February, with median prices declining 1.9 percent from a year ago. The median price is now around $225,000.

The West posted a 3.2 percent monthly decline, but is up 6.1 percent of February 2011 as well as up 3.1 percent in median prices.

The Midwest and South were both up, rising 1.0 and 0.6 percent respectively. The median price in the Midwest was down half a percent to $120,000, the lowest median price in the nation.

The South’s median price was up 1.8 percent from February 2011.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said market conditions are improving. “Supply and demand have become more balanced in more markets, but with tight supply in the lower price ranges – particularly in the West,” he said. “When markets are balanced, we normally see prices rise one to two percentage points above the rate of inflation, but foreclosures and short sales are holding back median prices.”

How have slowed sales affected inventory? Total housing inventory at the end of February rose 4.3 percent to 2.43 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, up from a 6.0-month supply in January.

“Falling visible and shadow inventory, combined with a dearth of new-home and apartment construction during the past three years, assure that rents will continue to rise, with likely home price increases in 2012,” Yun said.

Existing-sales weren’t the only figures struggling last month. Nationwide housing starts edged down 1.1 percent, according to the U.S. Commerce Department. Though a decline, this was the second-best pace since October 2008. This followed four months of gains

Builder confidence in the market for newly built, single-family homes was unchanged in March from a revised level of 28 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This means that following five consecutive months of gains, the HMI is now holding at its highest level since June of 2007.

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