Highlights

Existing home sales tumbled in March, falling from 4.60 mln in February to 4.48 mln. The Briefing.com consensus expected sales to increase to 4.62 mln.

Key Factors

The drop in sales was in direct contrast to the Mortgage Bankers Association’s Mortgage Purchasing Applications Index. That index showed that the demand for new homes increased 10.2% in March. That was the first increase since November 2011 and the largest monthly gain since May 2003.
The National Association of Realtors blamed the March decline on low inventory levels of homes that are currently in the most demand. Without directly spelling it out, the realtors believe that the number of available distressed properties in high investor locations, such as Florida, has declined. That caused investors who do not want to pay nondistressed prices to pull out of the market in March. Distressed properties, which made up 34% of the sales in February and 40% of the sales in March 2011, accounted for only 29% of the sales in March 2012.
The lack of investor demand was not offset by first-time or existing homeowner sales, causing overall home sales to slide.
While the drop in distressed inventories was bad for sales in March, it is actually a sign that the housing market is normalizing.
Prices increased 2.5% y/y in March to $163,800 as existing homes did not have as much competition from low-priced distressed properties. As inventories of distressed homes continue to decline in the coming months, housing prices should trend higher and induce more potential homebuyers, and sellers, back into the market.

Home affordability measures remain near all-time highs, but a combination of hesitant buyers and credit constraints are keeping existing home sales growth from experiencing a true breakout period. Instead, sales should move on a slow, upward -- but choppy -- path.

Category	MAR	FEB	JAN	DEC	NOV
Existing Home Sales	4.48M	4.60M	4.63M	4.38M	4.40M
Months Supply	6.3	6.3	6.0	6.4	7.1
Median Price Y/Y	2.5%	-0.3%	-2.1%	-3.9%	-3.6%