WASHINGTON - Sales of existing homes increased unexpectedly in February after six months of decline, but private economists said it was too soon to say the prolonged slide in housing is coming to an end.
The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It marked the first sales increase since last July, but even with the gain sales were still 23.8 percent below where they were a year ago.
Prices continued to slide. The median sales price for single-family homes and condominiums dropped to $195,900, a fall of 8.2 percent from a year ago, the biggest slide in the current housing slump. The median price for just single-family homes was down 8.7 percent from a year ago, the biggest decline in four decades.
Wall Street, which had been expecting another decline in home sales, was encouraged by the February increase as well as improved terms for Bear Stearns stockholders in the sale of that company to JPMorgan Chase & Co. The Dow Jones industrial average rose 187.32 points Monday to close at 12,548.64.
Economists, however, said they still believed any sustained housing rebound was many months away.
“The hemorrhaging has stopped but the recovery will be long, slow and painful,” said Bernard Baumohl, managing director of the Economic Outlook Group. “It’s unlikely that we will see any sustained jump in home purchases, must less higher prices, until mid 2009 at the earliest.”
Brian Bethune, an economist at Global Insight, said, “A quick bounce-back in the housing markets is simply not in the cards.”
White House press secretary Dana Perino said the increase in sales and a decline in the inventory of unsold homes was encouraging but “we can’t put a lot of stock in just one report.”
Lawrence Yun, chief economist for the Realtors, said that some formerly hot markets in California and Florida were seeing significant price declines now as sellers are cutting prices to attract buyers.
“We are not expecting a notable gain in existing-home sales until the second half of this year,” he said.
He said sales should be helped in coming months by recent moves to boost the loan limits on mortgages that can be insured by the Federal Housing Administration and purchased by Fannie Mae and Freddie Mac.
By region of the country, sales surged by 11.3 percent in the Northeast and were up 2.5 percent in the Midwest and 2.1 percent in the South. The only region of the country to see a sales decline was the West, where sales dropped by 1.1 percent.
The inventory of unsold homes dipped to 4.03 million units in February. That meant it would take 9.6 months to exhaust the supply of homes for sale at the February sales pace. That was down from January’s level of 10.2 months but still about double what the months’ supply had been during the peak of the housing boom.
Sales of existing homes fell by 12.8 percent in 2007, the biggest decline in 25 years, following an 8.5 percent drop in 2006. After a five-year boom, the steep downturn in housing over the past two years has been made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to multibillion-dollar losses on mortgages that have gone into default.
The steep slump in housing has raised concerns about a possible recession. Democrats are pushing for greater efforts to stem a tidal wave of mortgage foreclosures to keep more unsold homes from being dumped on an already glutted market.
Sen. Hillary Clinton, campaigning for the Democratic presidential nomination in Pennsylvania on Monday, called on President Bush to appoint an emergency working group on foreclosures to recommend new ways to confront the housing crisis.
“Over the past week, we’ve seen unprecedented action to maintain confidence in our credit markets and head off a crisis for Wall Street banks,” Clinton said in a campaign speech. “It’s now time for equally aggressive action to help families avoid foreclosure and keep communities across this country from spiraling into recession.”[MSNBC News]