Existing Home Sales Slow, Market Growth in Question

The pace of existing home sales declined in March, and February's pace was revised downward, according to the National Association of Realtors. Increasing prices and a shortage of available homes on the market, are impeding the market's progress back toward healthy levels, the group's economists said.

Sales of previously owned homes fell 0.6 percent to a 4.92 million annual rate in March, according to an April 22 report from the National Association of Realtors (NAR), indicating potential slowing in the housing market's growth.

Sales of existing single-family homes decreased 0.2 percent to an annual rate of 4.32 million. Purchases of multifamily properties, which includes townhouses and condominiums, fell 3.2 percent to a 600,000 pace, the report showed.

February's pace was revised to 4.95 million from a previously reported 4.98 million, and the number of existing homes on the market fell to 1.93 million in March from 2.32 million a year earlier. At the current sales pace, it would take 4.7 months to sell those houses, compared with 4.6 months at the end of February. That figure may increase in April, but it will likely remain below the six-months' supply considered healthy, NAR chief economist Lawrence Yun said at a press conference.

The annual sales rate of existing homes peaked at 7.08 million in 2005, before setting a 13-year low of 4.11 million in 2008. A total of 4.66 million previously owned houses were sold in 2012.

The median price of an existing home rose 11.8 percent to $184,300 last month, the 13th consecutive monthly increase and the widest margin since November 2005, to from $164,800 in March 2012. Home values rose 10.2 percent in the 12 months through February, the biggest gain in almost seven years, according to Irvine, California-based CoreLogic Inc.

First-time buyers made up just 30 percent of the total in both February and March. "First-time buyers are struggling to get into the market," Yun said, where cheaper properties are in shorter supply. According to the NAR, the supply of homes priced at $100,000 or less fell to 4.5 months in March, down from 4.7 in the same period last year.

Builders are slowly ramping up home construction, and a multi-family unit building surge in March pushed new home builds to the fastest pace in almost five years, according to an April 16 Commerce Department report. Single-family home starts fell in March, however, and industry insiders appear wary of future growth expectations. Homebuilder confidence – measured by the NAHB's Housing Market Index – fell two points to 42 in April, on a scale where readings below 50 indicate negative perceptions of the market.