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U.S. existing home sales grew in the month of March by 4.4 percent in sequential terms to an annualized 5.71 million. This is a robust recovery from February when sales advanced at a slightly downwardly-revised 5.47 million pace. The headline print considerably exceeded market projections of a more moderate recovery to 5.60 million.
The gains were mostly seen in the single-family segment where transactions increased 4.3 percent to 5.08 million. Meanwhile, sales in the smaller and more volatile condo/co-op segment rose 5 percent to 630,000.
Region-wise, activity in sales rebounded throughout most regions, growing in the Northeast, Midwest and South by 10.1 percent, 9.2 percent and 3.4 percent respectively. On the other hand, sales activity in the West continued to drop for the second straight month, falling 1.6 percent. However, the pace of sales continued to be higher than the levels seen a year ago across the board.
The number of homes available for sale grew 5.8 percent month-on-month; however, it stayed low at 1.83 million by historical standards. It is down 6.6 percent on a year-on-year basis and accounting for just 3.8 months worth of supply at the current sales pace. The low levels of inventory are exerting upward pressure on prices, with the median price rising 6.8 percent year-on-year, a solid figure in spite of a slight slowdown from the 7.6 percent pace in the prior month.
First-time homebuyers added 32 percent to the sales, the same from February and up 2 percentage points from a year ago.
Since December existing home sales activity in the U.S. has been very volatile. The uneven performance might partially be due to the swift rise in interest rates just after the election that probably swayed buyer behaviour. But seeing through the volatility, the trend is positive, with the solid rebound in March to a decade-high a welcome development, noted TD Economics in a research report.
Sales activity in the near-term is expected to stay restricted by still-low levels of inventory and rapidly rising prices that continue to outstrip income growth, stated TD Economics. The U.S. Fed is expected to raise rates twice more in 2017 and three times in 2018. This will further be a drag on affordability and might slightly hurt demand for homes. However, the medium-term outlook stays positive, as growing employment, wages and incomes are likely to provide significant offset, added TD Economics.
