A spring season of strong sales is crucial for the housing market. But so far, there are still more "for sale" signs than sold signs.
In the latest indication that the housing market is not snapping back, sales of existing homes fell 3 percent in March to 4.57 million units, after rising in February, the National Association of Realtors (NAR) reported. Also, home prices keep slipping, falling 12.4 percent from March 2008, according to the NAR.
However, it appears that first-time buyers are stepping in, attracted by lower home prices and near-record low mortgages.
The decline in the housing market is one of the factors weighing on the economy. As Americans watch the value of their homes decline and their neighbors struggle to sell their homes, they tend to be more conservative in their spending habits. When losses in the stock market are also considered, Americans’ average household wealth dropped 18 percent last year, or the equivalent of their annual income.
Despite the fall in the housing numbers for March, there appears to be more activity in lower-priced units. In fact, first-time buyers accounted for 53 percent of transactions, a NAR survey of realtors found last month. Many of the buyers, which tend to go for lower-priced units, appear to be in three states: California, Arizona, and Nevada.
Some of the improvement could be the result of mortgage financing programs enacted by the government. According to the NAR, real estate offices are getting many inquiries about the availability of a new $8,000 first-time home-buyer tax credit for 2009, which is part of the economic stimulus package.
In a sign this is helping lower-priced units recover, an index of home prices compiled by the Federal Housing Finance Agency rose 0.7 percent in February. And it rose 1 percent in January. The index tracks homes with conforming mortgages, which are usually below $417,000 and can be resold to Fannie Mae or Freddie Mac.
More lower-priced homes could also be on the market since banks have restarted foreclosure programs after a winter moratorium. For example, lenders filed a record number of mortgage default notices against California homeowners in the first three months of the year, according to MDA Data Quick, a housing research organization La Jolla, Calif. For the quarter, there were 135,431 default notices sent out in California, up 80 percent from the prior quarter and up 19 percent from the first quarter of 2008.
The real estate industry says the purchase of lower-priced homes is a good sign. “The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down, according to their needs,” said Charles McMillan, president of the NAR, in a statement.
Some economists are convinced that the housing market, in a choppy fashion, is finally beginning to bottom out. “I expect to see some signs of improvement in the second quarter,” says Bob Brusca of Fact & Opinion Economics in New York. “We could see a plateau and a real base we can build from.”
A crucial factor, Mr. Brusca says, is that some people are beginning to nibble at buying homes. “The main thing is that there is a sense people have put the price risk behind them," he says. "They don’t think there are more of these [price drops] looming ahead.”
But other economists are less sanguine. “People hoping for a quick turnaround are being unrealistic at this point,” says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. “It’s clear when you’re in a recession, the downturn in housing is going to last longer.”