NAR’s Yun Downplays Above-Expected Sales, Cites Slower March Traffic
US home resales surged in February, rising by 6.5% to a 5.77 million annual rate, the strongest in 13 years and well ahead of expectations for a 5.51 million pace.
But any positive momentum to be found in the February jump is blunted by the reality that sales will surely tumble in the coming months.
The February data reflect contract signings at the start of the year, so it is possible that some carry-over from early-February signings could be seen in the March data but after that, it is all downhill, National Association of Home Builders chief economist Lawrence Yun said.
“These figures show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales,” Yun said.
Inventories rose by 5.0% in February, even with the sales jump, keeping the month’s supply unchanged from January at 3.1 months. This was still well below its year-ago level of 3.6 months.
As the crisis proceeds however, supply could finally catch up to demand – assuming new home building continues to progress to free up supply of existing homes for sale.
Prices rose further in February and were up sharply from a year earlier due to a very fast market, one of the key issues keeping the sales pace from rising faster in 2019. NAR noted that almost half of the homes sold in February were on the market for less than a month.
The decrease in demand through this period could translate to lower prices when buyers are ready to get back into the market. At the moment, however, supply remains very short.
Mortgage rates have slipped over the last two weeks, a combination of slipping Treasury yields and Federal Reserve rate actions, setting up a perfect scenario for home buying – lower prices, low rates and increased supply.
However, it will take some time for social distancing to allow for an increase in buyer traffic.