Housing market looking up

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In a Monday, Feb. 20, 2012 photo, a home is for sale in North Andover, Mass. Sales of previously occupied U.S. homes rose in January to the highest pace in nearly two years, a hopeful sign ahead of the spring-buying season. (AP Photo/Elise Amendola)

Updated: March 24, 2012 9:02AM

WASHINGTON — The housing market is flashing signs of health ahead of the spring buying season.

Sales of previously occupied homes, townhomes and condos are at their highest level since May 2010. More first-time buyers are making purchases. And the supply of homes fell last month to its lowest point in nearly seven years, which could push home prices higher.

Sales now have risen nearly 13 percent over the past six months. While they still are well below the 6 million rate that economists equate with a healthy market, the gains have coincided with other changes in the market that suggest more sales are coming.

The National Association of Realtors said Wednesday that resales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million. The number of first-time buyers, who are critical to a housing recovery, increased slightly, comprising 33 percent of all sales. That’s still below 40 percent, which tends to signal a healthy market.

In the Chicago metro area, January sales of existing single-family homes and condos totaled 4,447, up 15.7 percent compared with January 2011, the Illinois Association of Realtors reported. It was the highest January sales total since 2007, before the recession sent sales tumbling.

The median sale price in the metro area fell 11.4 percent, to $140,000, the IAR said. By comparison, the median sale price in the Chicago area for all of 2008, as the full effect of the recession on housing was being felt, was $240,000.

Depressing prices in the Chicago area and markets around the country are large numbers of foreclosed homes. Last month, nationally, foreclosures and other distressed properties comprised 35 percent of all sales, the National Association of Realtors said.

Many foreclosures were held up after questionable practices by major lenders came to light. The country’s five biggest banks since have settled allegations of foreclosure abuses, which should speed along pending cases, Geoffrey Hewings, an economist at the University of Illinois at Urbana-Champaign, said in an IAR news release.

Hewings said the settlement is a positive “in the sense that the large backlog can now begin to be removed from the inventory,” but that large numbers of foreclosures will “continue to dampen any prospect of near-term housing price recovery.”

The NAR said that the supply of homes available for sale in January fell to 2.3 million, the lowest level since March 2005. At last month’s sales pace, it would take more than six months to clear those homes, consistent with a healthy housing market. Fewer homes on the market could help boost prices over time.

Most economists said the January report was encouraging, especially when viewed with other recent positive housing data.

Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year — and they responded in January to that interest by requesting more permits to construct single-family homes.

“The rise in existing home sales in recent months adds to the indication from housing starts, building permits, and homebuilder sentiment that the sector has improved modestly since the middle of 2011,” said John Ryding, an economist at RDQ economics.

Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs — the most in nine months — and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.

Analysts caution that the damage from the housing bust is deep and the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.

Many deals are also collapsing before they close. One-third of Realtors say they’ve had at least one contract scuttled over the past four months. That’s up from 18 percent in September.

Realtors say deals are collapsing for several reasons: Banks have declined mortgage applications. Home inspectors have found problems. Appraisals have come in lower than the bid. Or a buyer suffered a financial setback before the closing.

Contributing: AP, Mike Nolan