(Bloomberg News) Sales of previously owned U.S. homes in March unexpectedly fell for the third time in the last four months, showing an uneven recovery in the housing market.
Purchases dropped 2.6 percent to a 4.48 million annual rate from 4.6 million in February, the National Association of Realtors reported today in Washington. The median forecast of economists in a Bloomberg News survey called for an increase to 4.61 million. In January, sales at a 4.63 million rate were the strongest since May 2010.
Residential real estate remains the economy's soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures. An improved labor market and mortgage rates near historic lows have yet to stoke bigger gains in demand.
The market is "constrained by mild income growth, and there's still a lot of headwinds," Sean Incremona, senior economist at 4Cast Inc. in New York, said before the report. People are still underwater on their mortgages, a lot of these foreclosures are still weighing on us." Still, "affordability conditions are near their peak levels."
Estimates of the 73 economists surveyed by Bloomberg ranged from 4.45 million to 4.75 million after a previously reported 4.590 million annual rate in February. Even with the March decline, sales averaged 4.57 million homes in the first quarter, the strongest since the second quarter of 2010.
Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.
Another report today showed more Americans than forecast filed for unemployment benefits last week, a sign improvement in labor-market conditions may be stalling. Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period that was higher than initially estimated, according to the Labor Department.
The number of previously owned homes on the market fell to 2.37 million in March from 2.4 million the month before, today's report showed. At the current sales pace, it would take 6.3 months to sell those houses, the same as in February.
The median price of a previously owned home rose 2.5 percent to $163,800 from $160,600 in March 2011. The increase reflected more sales of higher-priced properties, Lawrence Yun, the group's chief economist, said at a press conference.
Sales of existing single-family homes decreased 2.5 percent to an annual rate of 3.97 million. Purchases of multifamily properties, including condominiums and townhouses, fell to a pace of 510,000 from 530,000.
Purchases declined in three of four U.S. regions, led by a 7.4 percent drop in the West. They declined 1.7 percent in the Northeast and 1.1 percent in the South. Sales were unchanged in the Midwest.
Cash transactions accounted for about 32 percent of sales, compared with 33 percent a month earlier. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, were 29 percent of the total, down from 34 percent in February.
First-time buyers represented 33 percent all of purchases, little changed from previous months. The "normal" level is about 40 percent, Yun said.
A measure of housing affordability a month earlier climbed to a record 206.1, according to the Realtors data. A value of 100 means that a family with the national median income has enough to qualify for a median-priced property.
Lower borrowing costs are doing their part. The average rate on a 30-year fixed mortgage fell to 3.88 percent last week, close to the record-low of 3.87 percent reached in February, according to Freddie Mac data.
To help hold down borrowing costs like mortgage rates, Federal Reserve policy makers last month said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank's holdings, a move dubbed Operation Twist. The program is scheduled to come to a close by the end of June.
Mortgage revenue helped Wells Fargo & Co. and JPMorgan Chase & Co., the two most-profitable banks last year, top first- quarter estimates, the companies reported this month.
"On the housing side, we're seeing improvement, and we've been seeing that for some time, but we're seeing it more," Wells Fargo Chairman and Chief Executive Officer John Stumpf said in an April 13 earnings call.
Short sales surpassed foreclosures for the first time in January, the latest month for which figures are available, according to Lender Processing Services Inc. Almost 24 percent of purchases were short sales in January, compared with 19.7 percent for sales of foreclosed homes.
Foreclosure filings, including notices of defaults and bank repossessions, fell 16 percent in the first quarter from a year earlier after lenders under legal scrutiny slowed actions against delinquent homeowners, RealtyTrac Inc. reported this month.
Investors accounted for 21 percent of purchases last month, down from 23 percent in February, today's data showed. Such figures suggest the recovery in housing isn't broad-based, said Jay McCanless, a housing analyst with Guggenheim Securities LLC in Nashville, Tennessee.
"We've seen investors and cash sales continue to be anywhere from 20 percent to 33 percent of monthly sales," McCanless said. "That may be giving the appearance that there's more activity, more demand for housing than may actually be the case."