biz.yahoo.com/ap/070323/economy.html?.v=9
Friday March 23, 10:48 am ET By Martin Crutsinger, AP Economics Writer Existing Home Sales Rise in February but Worries About Subprime Lending Increase WASHINGTON (AP) -- Sales of existing homes unexpectedly rose in February by the largest amount in nearly three years, but analysts expressed fears that the recovery for the battered housing industry will be slowed by spreading troubles in mortgage lending.
The National Association of Realtors reported Friday that sales of existing homes rose by 39 percent last month, pushed higher by a sharp increase in sales activity in the Northeast. It was the biggest increase since a similar increase in March 2004. The increase pushed sales up to a seasonally adjusted annual rate of 669 million units, still 36 percent lower than a year ago. Sales fell by 85 percent for all of last year as housing hit a sharp slowdown after setting sales records for five straight years. Analysts, who had been looking for sales to decline in February, said the increase reflected warmer weather in the Northeast and Midwest and said that the housing industry is still not on a sustained rebound. "Sales cannot be sustained at this level, which is way above the pace implied by mortgage applications," said Ian Shepherdson, chief economist at High Frequency Economics. The price of a median home sold last month dropped to $212,800, down by 13 percent from the same month in 2006. It marked a record seven straight months that the median home prime has fallen compared to the same period a year ago. Analysts said the price declines were helping to lure buyers back into the market. But analysts expressed concerns about what the growing problems in the subprime lending market will do to the prospects for future sales. Subprime mortgages were offered to people with weak credit histories who could not qualify for standard types of mortgages. Now an increasing number of those mortgages are going into default. That is forcing lenders to tighten up on their loan standards, meaning people who would have qualified for subprime mortgages will not be able to do so. David Lereah, chief economist for the Realtors, said he believed that demand for homes could be cut by 150,000 to 200,000 annually over this year and 2008 because of the lending troubles. "Our view is that the tightening in the subprime market will have a negative impact on home sales," Lereah said. "It probably won't postpone the recovery (in housing) but it will slow it." Sales of existing homes were up 39 percent in the Midwest and 16 percent in the South, while sales were unchanged in the West. Lereah said the reluctance of sellers in the West to trim prices was holding back a rebound in that region.
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