March 23 – Retirees either looking to sell their existing homes or see their retirement portfolios reclaim some of their losses got some good news today. Sales of existing homes in the U.S. increased 5.1% in February over January, helping give Wall Street its best day in months. Sales of single-family, townhomes, condominiums and co-ops were off 4.6% vs. the year earlier February. Prices continued to decline in February as the median selling price of a U.S. home fell to $165,400, off 15% from the year earlier period.
Many experts believe that the increase in sales is coming from first time buyers who are grabbing bargains in the current wave of foreclosures. Lawrence Yun, National Association of Realtors (NAR) chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”
The increases in sales were concentrated mostly in the northeast (+15.6%) and the west (6.1%), while other regions were essentially flat. Inventories of unsold homes, a major part of the current housing problem, have declined in recent months; they now represent a 9.7 month supply, considerably lower than the peak in April, 2008 of 11.3.
The good news in the housing market, combined with an apparent positive reception to the Obama Administration’s troubled asset repurchase program, helped set off Wall Street’s biggest rally in months. The Dow went up almost 500 points.