The housing market is showing consistent signs of improvement even as existing home sales fell slightly in February

Excerpt from TheHill.com – By Vicki Needham

The housing market is showing consistent signs of improvement even as existing home sales fell slightly in February.

The National Association of Realtors said Wednesday that sales slipped 0.9 percent last month to a seasonally adjusted rate of 4.59 million from an upwardly revised 4.63 million in January.

Sales have been trending up over the winter heading into the spring buying season, hitting its best stride in almost two years.

“The market is trending up unevenly, with record-high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” said Lawrence Yun, NAR chief economist.

“Although relatively unusual, there will be rising demand for both rental space and homeownership this year,” he said.

“The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”

Sales, which include single-family homes, townhomes, condominiums and co-ops, are 8.8 percent higher than the 4.22 million-unit level in February 2011.

Still, the pace is well below the 6 million in sales indicative of a healthy market.

The median sales prices of homes was $156,600, a 0.3 percent increase over last year’s levels. Prices have been dropping as foreclosures have crowded the market.

“The bottom line is investors and first-time buyers are competing for bargain-priced properties in much of the country, with home prices showing signs of stabilizing in many areas,” NAR President Moe Veissi said.

“Given an apparent over-correction in most areas, over the long term home prices have nowhere to go but up,” he said.

The supply of homes on the market increased more than 4 percent in February to 2.43 million, a 6.4-month supply at the current sales pace, up from a six-month supply in January. Fewer homes on the market pushes up prices.

“Falling visible and shadow inventory, combined with a dearth of new-home and apartment construction during the past three years, assure that rents will continue to rise, with likely home price increases in 2012,” Yun said.

Distressed homes — foreclosures and short sales sold at deep discounts — accounted for 34 percent of February sales. Twenty percent were foreclosures and 14 percent were short sales, down only slightly from 35 percent in January.

Meanwhile, homebuilders are more optimistic about the market. Although housing starts were down last month, building permits, a forward-looking indicator, hit their highest level in since October 2008.

A majority, 51 percent, of NAR members report that contracts settled on time in February, 18 percent had delays and 31 percent experienced contract failures.

The cancellation rate was 33 percent in January and 9 percent in February 2011.

Contract failures are commonly caused by declined mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.

“Many buyers are staying in the market after experiencing a contract failure and making an offer on another property, showing their determination to take advantage of the favorable conditions, but the cancellations are contributing to an uneven sales pattern,” Yun said.

All-cash sales, usually made by investors, rose to 33 percent of transactions in February from 31 percent in January.

Investors purchased 23 percent of homes in February, unchanged from January.

First-time buyers accounted for 32 percent of transactions in February, down from 33 percent in January.

A pickup in purchases by first-time buyers — it’s usually 40 percent in a healthy market — would indicate a deeper market recovery.

Sales were mixed across the country. They were up 1 percent in the Midwest and 0.6 percent in the South, while they fell 3.2 percent in the West and 3.3 percent in the Northeast.

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