Housing report disappoints as existing-home sales dip in February
By Jia Lynn Yang and Howard Schneider,
Sales of previously owned homes in the United States dropped 0.9 percent in February, according to a report released Wednesday, disappointing economists.
The number indicates that roughly five years after the housing bubble burst, the real estate market’s road forward remains bumpy. Many economists had thought that with mortgage rates near record lows and the job market improving, existing-home sales would rise.
Homes were sold at a seasonally adjusted annual rate of 4.59 million, compared with 4.63 million in January, according to a report from the National Association of Realtors.
Many homeowners still owe more than their houses are worth. The share of underwater mortgages is at its highest level since 2009, according to a report released this month by CoreLogic. There are 11.1 million homeowners underwater, accounting for 22.8 percent of mortgages.
Still, sales were 8.8 percent higher than they were a year ago. And the national median home price was $156,000 in February, up 0.3 percent from a year ago. Some economists say those figures point to a stabilizing housing market, especially compared with the steep price drops of last year.
“If this is a sign that those price declines are coming to an end, it’s just another piece of good news,” said John Ryding, chief economist at RDQ Economics.
Mortgage rates are tantalizingly low. The national average rate for a 30-year fixed-rate mortgage was 3.89 percent in February, according to Freddie Mac.
But foreclosures continue to drag on the market. Foreclosures and short sales still account for more than one-third of all existing home sales, according to the report Wednesday: 34 percent last month, compared with 39 percent in January.
At a congressional hearing Wednesday, Treasury Secretary Timothy F. Geithner said the administration was pressing Federal Housing Finance Agency Director Edward J. DeMarco “to take another look” at whether he could help underwater homeowners by writing down the face amount of mortgages owed to the two financing companies he oversees, Fannie Mae and Freddie Mac.
Democratic members of Congress said in hearings this week they were frustrated that DeMarco was not moving more quickly to reduce the principal owed on some mortgages — a step that both the Federal Reserve and the Treasury Department have concluded would make economic sense in some cases, since the alternative may be a default by the homeowner.
DeMarco, charged with managing what remains of Fannie and Freddie in a way that best safeguards taxpayers, has been skeptical of the approach. He is also caught between competing demands, winding down the activities of the two organizations at a time when the Obama administration envisions deeper federal involvement to help underwater homeowners.
“DeMarco should be doing principal reductions now,” said Rep. Elijah E. Cummings (D-Md.). “The only official who does not appear to share this view is Ed DeMarco.”
Geithner said the administration has no power to order DeMarco, as conservator of Fannie and Freddie, to adopt that approach.
But “there is space for doing more in the mandate that Congress gave him,” Geithner said. “We are working through the numbers with him, and I expect to hear more from him in the next couple of weeks.”
According to the association’s report, sales fell more in the Northeast and the West. Existing-home sales dropped 3.3 percent in the Northeast to an annual rate of 530,000 in February. In the West, they were down 3.2 percent.
By contrast, sales were up slightly in the Midwest (1 percent) and the South (0.6 percent).
“I wouldn’t call them strong numbers, but certainly the last few months have been better than what we’ve had for some time,” Mike Larson, an interest rate and real estate analyst at Weiss Research, said of the report. He also cited recent optimism from a survey of home builders.
Larson warned, though, that there is a risk that the real estate market may be hitting a plateau soon, in part because mortgage rates may creep up from their record lows.
“The spring selling season has a lot of optimism built up for it,” Larson said. “I think we’re going to be a little bit disappointed.”
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