Weather Boosts Home Sales; Chill Persists in Some Markets

Sales of existing homes enjoyed an unexpected increase in February, helped by unusually warm weather. But slack demand in some formerly red-hot housing markets produced what one analyst called a “tale of two cities.”

The National Assn. of Realtors reported Thursday that sales of existing single-family homes rose 5.2% last month to a seasonally adjusted annual rate of 6.91 million units.

The biggest increase in two years took economists by surprise. They had expected a drop of about 1% after five months of declines.

A standout performer over the last five years, housing has been slowing in recent months.

Analysts cautioned against reading too much into the February increase, saying it primarily reflected an unusually mild winter, which boosted buyer traffic.

David Lereah, the Realtors’ chief economist, said there has been a split in performance in recent months, with many previously hot markets suffering declines as rising mortgage rates make homes less affordable.

He said sales were down by double digits in such previously sizzling locales as Phoenix, Fort Lauderdale, Fla., and San Diego.

By contrast, he said some medium-priced markets were posting strong sales gains, citing Indianapolis, Albuquerque, N.M., and Houston as examples of double-digit gains.

“This is a report of a tale of two cities,” Lereah said, adding that higher interest rates were “tapping the brakes, notably in higher-cost housing markets.”

Nationwide, the median sales price for an existing home -- the point where half the homes sold for more and half for less -- was $209,000 in February, an increase of 10.6% from February 2005.

That price was 5% below the all-time high of $220,000 set in August and compared with a median of $210,000 in January.

Many economists believe that appreciation will slow from the double digits to about 5% this year, with sales declining by about 5% after five record years.

If that forecast comes true, then the housing boom of recent years may slow to a more sustainable pace.

By U.S. region, sales rose 19.2% in the Northeast in February, 11.1% in the Midwest and 5.1% in the West. Only the South showed weakness, with sales dropping 2.5% from January.

There were 3.03 million unsold homes on the market at the end of February, representing a 5.3-month supply at the current sales pace, the same as in January. That was up from a four-month supply a year ago. Analysts said the rising number would slow price increases.

Sales of single-family homes were up 4.7% in February to a seasonally adjusted annual rate of 6.06 million units. Sales of condominiums rose 8.8% to a seasonally adjusted annual rate of 850,000 units.

In other economic news, the Labor Department reported that the number of newly laid off people filing claims for unemployment benefits declined to 302,000 last week, a larger-than-expected improvement of 11,000 from the previous week.

It was the first drop in jobless claims in four weeks and provided further evidence that the labor market is recovering after a wave of layoffs after the Gulf Coast hurricanes.