WASHINGTON (MarketWatch) — Existing-home sales rose in February to reach the highest rate in more than three years, another sign of a strengthening housing market, as inventories posted an unusually large gain in the month, a trade group said Thursday.
Economists polled by MarketWatch had expected a pace of 5.02 million for February, compared with an original estimate of a 4.92 million rate in January. See economic calendar. On Thursday, NAR upwardly revised January’s rate to 4.94 million.
While sales remain below prerecession and bubble levels, low mortgage rates and an improving jobs picture are supporting demand. Also, rising prices are encouraging activity, luring sellers to place homes on the market.
Inventories rose 9.6% in February to 1.94 million existing homes available for sale. The months’ supply of existing homes rose to 4.7 in February from 4.3 in January, the first increase since April, but still a relatively low figure. January’s months’ supply was the lowest since May 2005.
Compared with February 2012, the median sales price rose 11.6% to $173,600. Elsewhere Thursday, a federal agency reported that home prices in January climbed 6.5% from the same period in the prior year. Read more about the government’s estimate.
“The trend in home sales still looks up; with inventories down sharply, prices are rising as well,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note. “While levels are still low, housing is now the strongest part of the economy in growth terms.”
Other housing data released this week indicated a housing market that is growing stronger over the long term, despite some mixed recent indicators. Construction on new U.S. homes recently nudged up, and confidence among home builders declined. Read more about construction.Read more about builder confidence.
Going forward, there’s concern that overly stringent lending standards and ongoing high unemployment could cut the housing market’s improvement.
Still, analysts expect the housing market to continue to add to economic growth this year given the Federal Reserve’s backing and an economy that is adding jobs. Indeed, a recent reading on building permits, which are a sign of future demand, hit the highest level since June 2008.