Joe Moshe, Broker/Owner, Charles Rutenberg Realty, says the decline in existing home sales during the month of February could be attributed to the more stringent lending requirements and an increase in mortgage rates, despite lower prices and a growing inventory. He also said that first-time homebuyers are the key to a recovery as they purchase these houses at affordable prices.
After seeing existing home sales outpace the figures from the previous 12 months in January, the National Association of REALTORS reported today that existing home sales in February fell by 9.6% from the previous month. The NAR reported a seasonally adjusted rate of 4.88 million units in February, compared to the upwardly revised figure of 5.40 million units in January. In addition, last month's figure was 2.8% lower than the February 2010 figure of 5.02 million units. (Existing-home sales are completed transactions that include single-family homes, townhouses, condominiums and co-ops.)
According to the NAR, the national median existing-home price was $157,000, down from $158,800 the previous month. Distressed homes - which are sold at discounts of 10-15% relative to traditional homes - accounted for 39% of market share, which is up from 37% in January and 35% in February 2010. Meanwhile, the national average commitment rate for a 30-year fixed-rate mortgage in January was 4.99%, up from 4.76% in January, according to Freddie Mac.
The Commerce Department recently reported that construction of new homes fell in February to an annual rate of 479,000 units - a 22.5% decline compared to January's upwardly revised figure of 618,000. It was the lowest start in 27 years. Meanwhile, building permits fell to a record low of 517,000 units in February from January's revised figure 563,000. It was also 20% below the levels of February 2010.
"Despite the extension of the tax cuts, lower sales prices and signs that the economy is improving, many homeowners have been scared off by higher interest rates and stricter lending requirements that require larger down payments and higher credit scores," Mr. Moshe said. "Home prices will continue to decline as the inventory increases. This may trigger another recession in which the bottom of the housing market will fall out."
The only bright spot in these statistics was that the number of first-time homebuyers increased over the previous month. According to the NAR, 34% of existing homes were purchased by first-time homebuyers in February, up from 29% in January.
"First-time homebuyers will play a major role in the existing home sales market," Mr. Moshe said. "They were able to purchase these homes at affordable prices because they made sure they had enough money for a down payment and their credit scores were in excellent shape. It is imperative that you know what your credit score, regardless of how much you can afford for a home. This is a critical factor which today's lenders are looking at."
Charles Rutenberg Realty is one of the nation's fastest-growing Agencies with more than 1,300 Agents on Long Island, Queens and Westchester. For more information, call (516) 575-7500, or visit www.crrli.com.
About Charles Rutenberg Realty
Founded in 2006, Charles Rutenberg Realty of New York is one of the nation's fastest-growing, most progressive Real Estate Agencies with over 1,300 Agents on Long Island, Queens and Westchester. Charles Rutenberg Realty specializes in residential properties in Nassau, Suffolk, Queens, Kings and Westchester Counties. Among the 1,900 independent Real Estate offices represented by Multiple Listing Services (MLS), Charles Rutenberg Realty has the highest market share for available inventory, listings taken for the first six months of the year and listings under contract. Its Agents are trained in the latest creative marketing programs and can fulfill all their clients' financial and personal needs when buying or selling a home. Charles Rutenberg Realty is headquartered in Plainview, New York, with offices in New York City, Florida and Illinois. For more information, call (516) 575-7500 or visit www.crrli.com.