By Vicki Needham - 04/22/14 10:58 AM EDT
Sales of existing homes fell in March to their lowest level since July 2012 with a combination of inventory shortages and rising prices deterring buyers.
Existing-home sales, which include completed transactions of single-family homes, townhomes and condominiums, slipped 0.2 percent to a seasonally adjusted annual rate of 4.59 million in March from 4.60 million in February, the National Association of Realtors said Tuesday.
Lawrence Yun, NAR chief economist, said that sales activity is under performing by historical standards.
“There really should be stronger levels of home sales given our population growth,” he said. "In contrast, price growth is rising faster than historical norms because of inventory shortages.”
Sales gains in the Northeast and Midwest, where winter weather was more prolonged and severe, were offset by declines in the West and South, a sign that the cold snap didn't weigh on housing purchases.
Regionally, existing-home sales in the Northeast rose 9.1 percent and were up 4 percent in the Midwest. Meanwhile sales fell 3 percent in the South and 3.7 percent in the West.
Despite the struggles Yun expects some improvement in the months ahead.
“With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly," he said.
The median existing-home price for all housing types in March was $198,500, 7.9 percent higher than March 2013.
Total housing inventory at the end of March rose 4.7 percent to 1.99 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace, up from 5 months in February.
But inventory is 3.1 percent above a year ago, when there was a 4.7-month supply.
Distressed homes — foreclosures and short sales — accounted for 14 percent of March sales, down from 16 percent in February and 21 percent in March 2013.
“With rising home equity, we expect distressed homes to decline to a single-digit market share later this year,” Yun said.
The average for a 30-year fixed-rate mortgage rose to 4.34 percent in March from 4.30 percent in February, which is higher than the 3.57 percent in March 2013, according to Freddie Mac.
First-time buyers accounted for 30 percent of purchases in March, up from 28 percent in February.
NAR President Steve Brown said first-time buyers have been stuck in a rut.
“There are indications that the stringent mortgage underwriting standards are beginning to ease a bit, particularly regarding credit score requirements, but they remain a headwind for entry-level and single-income home buyers,” he said.
Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.04 million in March but are 7.3 percent below the 4.36 million pace a year ago.