US home sales likely rebounded in February but remain sluggish

Economic IndicatorsAssociated Press

The National Association of Realtors reports on February sales of existing homes Monday at 10 a.m. Eastern.

SALES REBOUND: Economists believe that sales rose 2.1 percent to a seasonally adjusted annual rate of 4.92 million homes, according to a survey by data firm FactSet. That would be a modest bounce back from January, when home purchases tumbled 4.9 percent to 4.82 million.

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COLD MARKET: The real estate market has hibernated through the first two months of 2015. Strong job growth and relatively low mortgage rates have failed to awaken buyers, while few homes are being listed for sale and builders are catering to the wealthiest slivers of the market. Sales are running below last year's pace of 4.93 million sales, which represented a 3.1 percent drop from 2013.

Harsh winter storms have further depressed the market, shutting down construction and hurting open houses. Housing starts plunged 17 percent in February, the Commerce Department reported last week. Buyer traffic also slipped last month, according to the National Association of Home Builders/Wells Fargo index. Mortgage applications dipped in March, according to the Mortgage Bankers Association.

The recent storms have led several economists to expect a strong recovery this spring, when more buyers usually step up their search and sellers decide to list their properties.

Still, some homeowners are trapped by mortgage debt, making it unprofitable for them to sell. Their negative equity is a lingering aftershock from the recession and housing bust, limiting the supply of available homes on the market.

The real estate data firm Zillow reported last week that 16.9 percent of homeowners owe more on their mortgage than their homes are worth. In several metro areas including Philadelphia, Houston and Boston, that rate actually increased from the levels in the third quarter of 2014.

Nor have buyers responded much to the comparatively low mortgage rates.

Average 30-year fixed rates were 3.78 percent last week, according to the mortgage giant Freddie Mac. That average has plunged from a 52-week high of 4.41 percent, which should help to make housing more affordable.

Because of tight credit, few potential buyers have been able to take advantage of the low rates.

An Urban Institute index measuring credit availability found that lenders are taking fewer risks with mortgages, choosing buyers with high credit scores and providing them routine mortgages, rather than the exotic and opaque loans that inflated the housing bubble and led to the financial crisis.

The restricted credit "has been, and threatens to continue to be, a headwind for the housing recovery," said Michelle Meyer, a senior economist at Bank of America Merrill Lynch, in a client note.