Existing homes sales ticked up in February to the highest rate in three years, another sign that the housing market is recovering.
The seasonally adjusted annual rate rose 0.8 percent from January to 4.98 million, up from an upwardly revised 4.94 million, the National Association of Realtors reported Thursday. That’s 10.2 percent higher than a year ago and the highest it’s been since November 2009.
“The overriding message is that the U.S. housing recovery continues,” said Jennifer Lee, senior economist at BMO Capital Markets.
The national median home price reached $173,000, up 11.6 percent from this time last year.
“It’s a continuation of an ongoing trend. You have improving affordability, low interest rates, an improving economy,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research.
As a result of the Federal Reserve policy of keeping interest rates low, the market has been aided by historically low mortgage rates.
Homes have also been selling quicker, signaling that demand is strong. Last year, it took a median of 97 days to sell a home, compared to 74 days in February.
Distressed home sales – short sales and sales of foreclosed homes – were up 23 percent from January and accounted for a quarter of the sales in February. But the number is still down 34 percent than this time last year.
Inventory is still below a healthy 6-month supply, but more homeowners have been listing their homes on the market in response to rising home prices. The number of available single-family homes, townhomes and condos was up by 9.6 percent in February to 1.94 million, which represents a 4.7-month supply.
The stil tight inventory has pushed up home prices and has been helpful for sellers, but has also been frustrating for potential homebuyers who have little to choose from and run into competitive bidding on properties.
In cities like Austin, the inventory has fallen to a 2.6-month supply. When Sean McCormick, a real estate agent in Austin, listed a property earlier this year, he got 6 offers within 48 hours. Though this might be good thing for sellers, he said that it’s been hard when it comes to buying properties.
“I’m not winning all my bids. It’s frustrating. There’s so much competition going on,” McCormick said. He said there have been multiple bids on every offer he’s made so far for his clients this year.
In this heated market, Jackie Long, a real estate agent in Denver tells all of her clients to write a personal letter to the seller to better the chances of winning.
“If I’m in a competitive situation, it makes a financial decision and an emotional decision much more personal,” she said.
In light of the strong demand for homes, housing is expected to spur other sectors of the economy as inventory tightens.
Builders began new construction on homes at the fastest pace in 4 years at an annual rate of 917,000, the Commerce Department reported Tuesday. Building permits were also up 33.8 percent from this time last year.
The strength in housing is expected to add jobs and increase sales of durable goods, such as furniture and appliances.
Construction also added 48,000 jobs in February, and building is expected to rise in the spring.
“It’s almost like a domino effect with the housing sector,” Lee said.
Source: National Association of Realtors