Existing Home Sales Pick Up in February

March 23, 2006 — -- Sales of pre-owned homes saw an unexpected uptick during February, according to new data from the National Association of Realtors. That means existing-home sales reversed a five-month slide.

The association says sales of houses were at a seasonally adjusted, annual sales pace of 6.91 million units, up 5.2 percent from January. Most economists were expecting another month of declining sales, so today's news is surprising.

The median home price for February was $209,000 -- up 10.6 percent from the same time last year.

So what caused the reversal? While the housing market appears to be cooling, it seems winter warming contributed to the pickup in sales. The association's chief economist says that the one-month sales increase was a result of warm weather in January.

Apparently, people were able to get out and home shop when the sun was shining, and a lot of those deals closed in February. Because the numbers are seasonally adjusted, warm weather during winter months has a tendency to be a significant pull on the numbers.

Analysts across the spectrum say today's bullish number is an aberration -- most predict the national sales rate for existing and new homes will be down this year.

Why? Mortgage rates are going up and will continue to go up throughout the year. A Freddie Mac survey shows the average 30-year fixed-rate mortgage now comes with a 6.25 percent rate, up from 5.63 percent a year ago. That means the average home buyer is facing an extra $100 in monthly mortgage payments this year.

Proof that we'll see a downward trend in the next few months can be seen in today's data in the nation's homes-for-sale inventory. Today, there are more than 3 million houses on the market, enough to keep the nation's buyers happy for more than 5.3 months. With more supply and cooling demand, we should see prices and sales volumes down for the year.