Stocks on Wall Street flipped from green to red on Monday after the National Association of Realtors reported a drop in existing home sales in March, contrary to the increases that economists were anticipating.
The organization said that sales of pre-owned homes, which are completed transactions that include townhomes, single-family homes and co-ops, declined by 0.6 percent in March to a seasonally adjusted annual rate of 4.92 million homes. NAR also downwardly revised February’s rate from a 4.98 million annual rate to 4.95 million.
The latest figure still tops figures from March 2012 by 10.3 percent, however, economists were predicting the annualized rate for March to rise to a 5.03 million pace.
The longer-term trends of existing home sales still support a recovering housing market. Sales on a year-over-year basis have topped the prior year from 21 consecutive months.
Short sales and foreclosures are still playing a decent role in sales, accounting for 21 percent of March sales, down from 25 percent in February and 29 percent in March last year.
Median prices for homes increased by 11.8 percent compared to March 2012, rising to $184,300. It was the biggest jump in prices since November 2005 and represented the thirteenth consecutive month of prices increasing compared to the year earlier month. The last time the string of increases was that long was May 2005 to May 2006.
Demand is outpacing supply, according to NAR chief economist Lawrence Yun. “Buyer traffic is 25 percent above a year ago when we were already seeing notable gains in shopping activity,” he said. “In the same timeframe housing inventories have trended much lower, which is continuing to pressure home prices.”
Total housing inventory at the end of March rose by 1.6 percent to 1.93 million units on the market for sale. This represents a 4.7-month supply at the current pace. In February, there were 1.94 million units for sale, equating to a 4.6-month supply.
Yun said that there needs to be a six-month supply to have a balanced market of buyers and sellers, but that ratio was unlikely to be achieved without an increase in housing starts.
Selling times are getting shorter, indicative of the supply/demand constraints. The median time on the market for all homes was 62 days in March. In March last year, the median time was 91 days. In February, the median time was 74 days.
The markets were trending in the green at the opening bell, but quickly reversed course as investors remain on edge about economic data that started the year booming now showing a deceleration in U.S. economic growth. One hour into the trading day, the Dow Jones Industrial Average is down by 80 points, the S&P 500 is off by 5 points and the Nasdaq has eased 3 points.