U.S. Existing Home Sales Rose Modestly in February

• Existing home sales in the US rose to 4.98 million annualized units in February 2013 from the revised 4.94 million reported in the previous month (previously reported as 4.92 million). Market expectations had been only marginally higher at 4.99 million annualized units.
• Homes available for sale rose by 9.6% to 1.94 million units, thereby leading the month’s supply of unsold homes to rise to 4.7 from 4.3 in the previous month. The inventory of existing homes available for sale was 19.2% below the listed inventory in February 2012.
• The median price of existing homes increased 11.6% on a year-over-year basis as the share of distressed property sales declined from a year ago.
• This improvement in existing home sales followed Tuesday’s encouraging housing starts report and lent further credence to the anecdotal assessment released yesterday in the Fed’s Federal Open Market Committee (FOMC) policy statement that the housing sector has strengthened further. The continued recovery in the US housing market supports our forecast for residential investment to continue to make a positive contribution to overall GDP growth in 2013 following a 0.3 percentage point contribution in 2012.
• In a separate report, initial jobless claims rose by 2,000 to 336,000 for the week ending March 16, 2013 partially to retrace an 8,000 drop the previous week. Market expectations had been for the level of claims to rise to 340,000 in the latest week. The four-week moving average of initial claims declined to 339,750 from 347,250 the prior week.

An annualized 4.98 million existing homes were sold in February 2013, which was a 0.8% increase from the revised 4.94 million annualized units sold in January (initially reported as 4.92 million). The level of sales in February was slightly below the 4.99 million sales expected by the market. The improvement in resale activity in February reflected increases in sales of condos and co-ops up 8.8% to 0.62 million annualized units, to reach the highest level of sales since July 2007. Sales of single-family homes edged down 0.2% to 4.36 million annualized units. Strength was seen in the West (2.6%) and South (2.6%) while modest decreases in the Midwest (-1.7%) and Northeast (-3.1%) provided some offset.

The absolute number of existing homes available for sale rose 9.6% to 1.94 million units in February from 1.77 million units in the previous month. At the current pace of sales, it would take 4.7 months to clear this inventory of unsold homes, which is up from the reading of 4.3 seen in January, which marked the lowest reading since May 2005. The inventory of existing homes available for sale was 19.2% below the listed inventory in February 2012.

The national median sales price of existing homes rose on a year-over-year basis in February with the pace of increase accelerating to 11.6% from the downwardly revised 10.3% rate in January (was 12.3%). The increase in February represented the fastest pace of annual growth since November 2005. The strong gain in prices came as distressed sales (foreclosures and short sales that typically sell at steep discounts) accounted for 25% of total sales, which was up from the prior month but down from 34% in February 2012.

This improvement in existing home sales followed Tuesday’s encouraging housing starts report and lent further credence to the anecdotal assessment released yesterday in the Fed’s FOMC policy statement that the housing sector has strengthened further. The continued recovery in the US housing market supports our forecast for residential investment to continue to make a positive contribution to overall GDP growth in 2013 following a 0.3 percentage point contribution in 2012. While maintaining the standard caveat that housing activity remains depressed relative to pre-recession norms, improving sales and firming prices support the view that progress made in the residential real estate market will continue during the forecast horizon as market conditions normalize.

In a separate report, initial jobless claims rose by 2,000 to 336,000 in the week ended March 16, 2013 partially to retrace the 8,000 drop the previous week that moved claims to a revised 334,000 (was 332,000). The four-week moving average of initial claims (which better controls for volatility in the weekly data) declined to 339,750 from 347,250 the prior week, therein continuing the general downward trend evident since claims peaked in early 2009.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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