WASHINGTON (MNI) - A second month of a fractional decline in existing home sales, the 0.2% slippage in March, kept sales to a 4.59 million annual rate and the year's sales will now not quite reach the 5 million mark after all, the National Association of Realtors reported Tuesday.
Nevertheless, despite seven of the last eight months carrying a minus sign, a "spring bounce" in sales is still in the works, NAR Chief Economist Lawrence Yun told reporters as the monthly report was being made public. February sales had been 0.4% lower than January and its level of sales, 4.60 million, was not "I mentioned last August when the sales rate reached 5.3 million all the indications were that this was the last hurrah of the current cycle," Yun said.
After "essentially no change" in the sales level for the past couple of months, he continued, "buyer traffic reported by Realtors implies some upturn even after seasonal adjustments so I believe that some spring bounce can be anticipated." In addition, "There is still some pent-up activity from the weather that still needs to show," with January and February delays pushed into April and May, he said.
"There's no slowdown at all in the prices," he went on. "We do need to see a moderation in price growth because affordability will impact sales negatively."
Houses, he said, continue to be priced out of reach for many buyers. "Mortgage rates will be rising. It's inevitable," Yun said. For home prices,"with the inventory shortage, there is only one way, up." The affordability problem "can be tamed," he said, "with additional inventory. That's where housing starts come in."
"Increase housing starts," Yun said, as the rate of new construction - the factor that pushes existing homes on to the market - stays well under what it was even during the days of Federal Reserve Chairman Paul Volcker and his battle to lower 18% mortgage rates.
"Housing starts have been under a million for the past six years," Yun said, yet back in the 1970s were running up to 1.7 million. "The first priority should be the housing starts, getting more inventory to the market."
Instead of increasing, first quarter 2014 housing starts "are lower than a year before so that is a huge choke point regarding the housing recovery potential." Realtors says they have buyers, but no inventory, he said. The shortage "is pushing up prices too fast."
As an example of the price squeeze experienced by would-be buyers, "There's a huge social tension in the San Francisco market," Yun said. "Prices have risen 20% to 30% and renters feel completely left out. We don't want to have a country where there's a division, where people view some are participating and some arnot."