WASHINGTON – Sales of previously owned U.S. homes dropped more than forecast in February, sending prices to the lowest level since 2002 and indicating the market is struggling to recover.
Purchases decreased 9.6 percent to a 4.88 million annual rate, less than the 5.13 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed on Wednesday in Washington. The median price fell 5.2 percent from a year earlier.
Foreclosures are adding to a glut of distressed properties on the market and pressuring values, leaving some Americans with bigger mortgages than their homes are worth as joblessness hovers near 9 percent. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.
“The demand for housing just isn’t there,” said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, N.C. “We have to clear this inventory of foreclosures. We think that happens in the second half of the year.”
Estimates of the 76 economists surveyed by Bloomberg ranged from 4.8 million to 5.39 million.
Stocks rose as Japan made progress in cooling nuclear reactors at a crippled plant. The Standard & Poor’s 500 Index gained 1.5 percent to 1,298.38 at the 4 p.m. close in New York. Treasuries fell, pushing up the yield on the benchmark 10-year note to 3.33 percent from 3.27 percent late on March 18.
No Recovery
“One cannot say that we are in a recovery right now,” Lawrence Yun, chief economist at the Realtors’ association, said at a press conference. “If the price decline persists, even with job recovery, it could hamper some buying enthusiasm.”
Distressed properties accounted for 39 percent of sales, and the share of all cash transactions was 33 percent, the highest since at least August 2008, when the agents’ group began tracking the monthly figure.
Sales fell in all regions in February, led by a 12 percent drop in the Midwest and a 10 percent decrease in the South.
The median price decreased to $156,100 last month from $164,600 in February 2010.
The number of previously owned homes on the market rose 3.5 percent to 3.49 million from January. At the current sales pace, it would take 8.6 months to sell those houses compared with 7.5 at the end of the prior month. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
Tax Credit
Housing, the industry that precipitated the recent recession, is having trouble gaining strength after the government’s homebuyer tax credit expired and caused sales to plunge to a 3.86 million rate in July.
Fed officials, in a statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.”
“Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices,” Fed Chairman Ben S. Bernanke told lawmakers during a March 2 testimony. “There’s no demand for construction to build houses” until more people want homes, he said.
Home prices dropped in the 12 months to December by the most in a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 2.4 percent, the biggest year-over-year decrease since December 2009, the group said Feb. 22.
Foreclosure Outlook
In addition to an unemployment rate lingering near 9 percent, some underlying home values are less than the mortgages on the properties. That indicates foreclosure filings may climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said earlier this year.
Cheaper homes and distressed properties are making it difficult for builders as well. Housing starts fell in February to the slowest pace since April 2009 and building permits slumped to a record low, Commerce Department figures showed March 16.
For housing, employment “is the most important part today or biggest impediment,” said Larry T. Nicholson, CEO of Ryland Group Inc., a Calabasas, Calif.-based homebuilder catering to first-time buyers.
Whether potential buyers “have a job and they’re going to keep their job or whether their hopes of employment are out there is still the biggest challenge for us today,” Nicholson said at an investor conference March 8 in Orlando, Fla.
