Washington: A report released by the National Association of Realtors on Monday showed a significant pullback in U.S. existing home sales in the month of March.
NAR said existing home sales plunged by 4.9 percent to an annual rate of 5.21 million in March after soaring by 11.2 percent to a revised rate of 5.48 million in February.
Economists had expected existing home sales to tumble by 3.8 percent to a rate of 5.30 million from the 5.51 million originally reported for the previous month.
The bigger than expected pullback came after existing home sales reached their highest level in almost a year in February.
With the monthly drop, existing home sales in March were down by 5.4 percent compared to 5.51 million in the same month a year ago.
“It is not surprising to see a retreat after a powerful surge in sales in the prior month,” said NAR chief economist Lawrence Yun. “Still, current sales activity is underperforming in relation to the strength in the jobs markets. The impact of lower mortgage rates has not yet been fully realized.”
The report said the median existing home price in March was $259,400, up 3.7 percent from $250,100 in February and up 3.8 percent from $249,800 in March of 2018.
Total housing inventory increased to 1.68 million existing homes available for sale at the end of March, representing 3.9 months of supply at the current sales pace.
“Further increases in inventory are highly desirable to keep home prices in check,” said Yun. “The sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth.”
NAR said single-family existing home sales slumped by 4.9 percent to an annual rate of 4.67 million in March, while existing condominium and co-op sales plummeted by 5.3 percent to a rate of 540,000.
On Tuesday, the Commerce Department is scheduled to release a separate report on new home sales in the month of March.
New home sales are expected to drop to an annual rate of 650,000 in March after jumping to a rate of 667,000 in February.
Why Markets Care About Existing Home Sales Also Called Home Resales
Existing Home Sales report is released monthly, about 20 days after the month ends, by the National Association of Realtors (NAR).
It measures annualized number of residential buildings that were sold during the previous month, excluding new construction. While this is monthly data, it’s reported in an annualized format (monthly figure x12).
The Existing-Home Sales data measures sales and prices of existing single-family homes for the nation overall, and gives breakdowns for the West, Midwest, South, and Northeast regions of the country. These figures include condos and co-ops, in addition to single-family homes.
Existing Home Sales is a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction.
Homebuilder stocks slip, KBW cut its rating on D.R. Horton shares.
Homebuilder stocks are slipping after sales of previously owned U.S. homes fell more than forecast in March and KBW cut its rating on D.R. Horton shares.
Home sales declined for a fourth time in five months, even with lower mortgage rates, wage gains and slower home-price appreciation. The S&P Supercomposite Homebuilding Index fell as much as 1.6 percent Monday, its biggest intraday decline since March 28, led by William Lyon Homes, M/I Homes Inc. and Cavco Industries Inc.
“Existing home sales cooled in March after an explosive rebound in February,” Amherst Pierpont Securities chief economist Stephen Stanley wrote in a note. He added that “March might be the closest approximation we have seen in a while to the true underlying sales pace,” after February’s bounce back from two months that were affected by higher mortgage rates, weather disruptions, and interruptions that may have been caused by the federal government’s partial shutdown.
D.R. Horton, which is due to report quarterly earnings on Thursday, dropped as much as 2.6 percent. KBW analyst Jade Rahmani cut the stock to market perform after a year-to-date rally propelled its valuation close to the firm’s price target of $47 a share.
He also sees “a choppy spring selling season,” with varied performance in different regions and buyer segment, along with impact from severe weather, even though demand may have improved from year-end amid lower mortgage rates. Rahmani was concerned operating margins may underperform investor expectations in the second half of the year, driven by a mix shift toward lower-margin entry-level product, higher incentives, higher construction costs and tough competition.
Among outperformers today, NVR Inc. rose as much as 3.5 percent to the highest since June after reporting better-than-expected results. PulteGroup Inc., set to release its earnings Tuesday before the bell, advanced almost 1 percent.