NEW YORK (MainStreet) Home sales plunged across the U.S. last month from a year earlier, as the harsh winter weather kept many would-be sellers from listing their homes and caused a housing shortage for spring home buyers.
"We're experiencing the lowest inventory that I have seen since I started back in 2003," said Chicago-based real estate agent Mary Wallace. "We're not seeing the number of homes on the market that we usually would at this time of year."
Existing home sales fell by 7% in February from last year to the slowest pace for existing home sales since mid-2013, according data released by National Realtors Association.
"We had ongoing unusual weather disruptions across much of the country last month with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago," said NAR chief economist Lawrence Yun.
The total housing inventory is relatively low with only 2 million homes listed, which represents a 5.2 months supply, according to U.S. Census data. Economists say a typical housing market needs a six to seven-month supply of homes to have a healthy mix between sellers and buyers.
"Inventories are extremely lean all over the country and I think the harsh winter will probably hurt existing inventories too," said Wells Fargo economist Mark Vinter, who added that the unseasonable cold weather delayed sellers from listing their homes.
"The South and the East Coast were the most impacted and there hasn't been much of chance for those folks to get their homes fixed and ready for sale," he added.
The winter home market is usually the slowest time for the housing market with a pattern of bouncing back in March and April, real estate experts say.
"The spring home buying season will probably take a little longer to materialize this year than in year's past because there is just not a lot of inventory and not a lot of homes for sales," the Wells Fargo economist said.
Kimberly Conroy, a Coldwell Banker real estate agent in Raleigh, N.C says sales have been down for the first time in 19 months and that this year's weather has delayed many sellers from listing their properties.
"We're a month behind and I think we'll probably see our spring market come into play around the middle of April," Conroy said.
Existing home sales began to slow in the middle of 2013 after interest rates increased and the market hasn't returned to those levels. Sales have declined over the last six months and are only up by 3 percent over the past year, according to PNC Financial that also predicts the housing market to spring back in April.
"We have had higher mortgage interest rates that been a drag on sales and then we had the bad weather which has also been a drag," said Gus Faucher, a PNC Financial economist. "We haven't seen existing home sales back yet, but they will soon."
Real estate experts say there is still a strong pent-up demand for housing since many people postponed home purchases for the last five to six years because of financial concerns and that the housing inventory is tight for first-time homes.
"I know that things are behind and another thing that is going on is the shortage of home under $350,000 - that's the first-time home buyers," Conroy said. "They're trying to buy a house and there is nothing on the market for first-time home buyers."
Conroy estimates there is less than a two-month supply of homes under $350,000 in the Raleigh area, representing a critical housing shortage.
Higher prices are chasing some first-timers from the market. First-time home buyers accounted for 28% of homes purchased in February, down from 30% last year, according to Realtors.
Economists are counting on an expansion of inventory and steady job growth with rising incomes to fuel the housing market, but affordability and reduced inventory threatens to undercut the normally busy spring home buying season.
Mortgage rates went up last spring and short-circuited the housing recovery across the county and buyers haven't come back, further impacted by the incremental weather this year.
But, real estate economists remain confident that the housing market will bounce back this year, predicting the market to catch-up after a slow start.
"We're fairly optimistic about the spring home buying season since we still have such low home mortgage rates and credit has eased and we do expect to see people list their homes for sales since prices have improved," Vitner said.
--Written by Farran Powell for MainStreet