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Home sales, on a seasonally-adjusted basis, rose an unexpected 5.1% in February compared to January (Though home sales were down 4.6% compared to a year earlier), the National Association of Realtors said March 23.
But the monthly increase might be little more than statistical noise. It might be that the slightly warmer-than-usual February brought out some more buyers, said Patrick Newport, U.S. Economist for HIS Global Insight. But the formula used to adjust data for seasonal buying patterns tends to exaggerate monthly irregularities, he said.
The home sale increase was surprising given that January “pending home sales,” a leading indicator because that contracts are typically signed a couple months before closing, actually dropped 7.8%.
The median existing home price was down 15.5% from a year earlier. Prices are falling quickly, in part, because 40% to 45% of transactions nationwide are foreclosures or short sales. The mix of homes that are selling has also changed in recent months. First-time buyers make up half the market and tend to buy less-expensive houses. Home sales in luxury markets have slowed to a trickle.
First American CoreLogic also came out with a report March 23 that said that Rhode Island edged out Florida in January as the fourth worst market in the country in terms of annual price depreciation (Prices fell 19.7% in Rhode Island and 19.5% in Florida). The five worst markets were: Nevada, California, Arizona, Rhode Island, Florida, according First American CoreLogic’s Home Price Index report.
Rhode Island has been in the top five or six worst markets for many months but Mark Fleming, chief economist for First American CoreLogic, said Rhode Island’s move into the top 4 is just a “blip.” He expects Florida to retake the spot when the February report is released.
Rhode Island real estate market was battered by a heavy concentration of subprime mortgages and second homes owned by vacationers and investors. Prices consistently increased during the boom by double digits and are now falling fast. The recession has only made matters worse, as the tiny state loses manufacturing jobs.
Paul Leys, president of the Rhode Island Association of Realtors and broker/owner Gustave White Sotheby’s International Realty, said foreclosure-related sales now make up a large portion of the market and need to be flushed out of the system. The median home price of about $230,000 has dropped back down to 2003 levels, Leys said.
“We’re getting lot of press with negative numbers coming out,” Leys said. “Prices went up so high during the good times. It was bound to correct itself sooner or later.”