Sales of existing homes fell 0.9 percent in February to a seasonally adjusted annual rate of 4.59 million homes according to data released this morning by the National Association of Realtors® (NAR).  The increase was over January sales that were adjusted from an original estimate of 4.57 million to 4.63 million sales. Despite the slight month-over-month decrease, February sales were up 8.8 percent over the 4.22 million pace during the same period in 2011.  Existing home sales are completed transactions that include single-family homes, townhomes, condominiums and co-ops.

Lawrence Yun, NAR chief economist, said underlying factors are much better compared to one year ago.  "The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market," he said.  "Although relatively unusual, there will be rising demand for both rental space and homeownership this year.  The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy."

Single family home sales were at a rate of 4.06 million, down 1 percent from January and 9.4 percent higher than one year earlier.  Condo and coop sales were unchanged from January at a rate of 530,000 and 3.9 percent higher than in February 2011.

All four regions are seeing home sales at a higher level than one year ago, but sales were off in the Northeast and West from January by 3.3 percent and 3.2 percent respectively.  Year over year those regions saw increases of 5.5 percent and 6.1 percent.  Sales in the Midwest were up 1 percent for the month and 13.3 percent for the year and in the South February sales were 0.6 percent higher than January's and 9.3 percent above those in February 2011.

Fifty-one percent of NAR members report that contracts settled on time in February, 18 percent had delays and 31 percent experienced contract failures; the cancellation rate was 33 percent in January and 9 percent in February 2011.  Contract failures are commonly caused by declined mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.

 "Many buyers are staying in the market after experiencing a contract failure and making an offer on another property, showing their determination to take advantage of the favorable conditions, but the cancellations are contributing to an uneven sales pattern," Yun said.

NAR reports that there are currently 2.43 million homes for sale in the U.S., a 6.4 month supply at the current sales pace.  In January there were 2.33 million homes for sale, a 6.0 month supply, but that was the lowest inventory since at least 2008.  The number of homes for sale has dropped by 19.3 percent since February 2011 and months to absorb have dropped 25.6 percent from 8.6 months.

Existing home prices rose 0.3 percent in February 2012 compared to February 2011 to a median of $156,000 for all housing types.  Distressed homes, foreclosures and short sales, accounted for 34 percent of home sales in February with foreclosures accounting for 20 percent and short sales 14 percent.  In January distressed homes were 35 percent of the market and one year earlier they accounted for 39 percent of sales.

While NAR warns against placing significance on month -to-month price changes, the median price for a single family home did increase from $154,600 in January to $157,100 in February, the first monthly increase since November.  February's sales price represented an increase of 0.1 percent from February 2011 when the median price was $156,900.   The median price of a condo was $153,000 in February, an annual increase of 1.6 percent.

The median price of all homes increased year-over-year by 1.8 percent in the South to $138,100 and by 3.1 percent in the West to $195,300.  Prices were down on the same basis in the Northeast where the median price of $225,800 was 1.9 percent lower than a year earlier and the Midwest where the median price of 120,500 was 0.5 percent below the February 2011 median.

All-cash sales rose to 33 percent of transactions in February from 31 percent in January; they were 33 percent in February 2011.  Investors account for the bulk of cash transactions.

Investors purchased 23 percent of homes in February, unchanged from January and up from 20 percent in February 2011.  First-time buyers accounted for 32 percent of transactions in February, down from 33 percent in January and 34 percent in February 2011.

 "The bottom line is investors and first-time buyers are competing for bargain-priced properties in much of the country, with home prices showing signs of stabilizing in many areas,"   NAR President Moe Veissi said.  "People realize that homeownership is an investment in their future.  Given an apparent over-correction in most areas, over the long term home prices have nowhere to go but up."