WASHINGTON (AP) – Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties. Economists said sales, while still at levels not seen since 1997, may finally be coming back to life after declining sharply following the stock market plunge last autumn.
Prices, however, are expected to keep falling well into the year. Tens of thousands of homes remain tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
“The four-letter word in the housing market is ‘jobs,’” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”
The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January.
It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.
“If January was a disaster for housing, February may be the rebound month,” wrote Joel Naroff, president of Naroff Economic Advisors.
The sales figures don’t yet reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. That should juice up early summer sales, but how much will depend on the overall condition of the U.S. economy.
“If the economy stabilizes around midyear and financial conditions improve, then sales will probably begin to slowly increase as buyers step back into the market,” wrote JPMorgan Chase analyst Abiel Reinhart. “An important reason for this is that affordability has already increased sharply, both as a result of lower prices and lower mortgage rates.”