Sales of previously owned homes unexpectedly climbed in February as record foreclosures brought bargain hunters into the market to take advantage of lower prices.
Purchases increased 5.1% from January, to an annual rate of 4.72 million, the National Association of Realtors said Monday in Washington.
The median price slumped 15.5% from a year earlier — the second-biggest drop on record — and distressed properties accounted for 45% of all sales.
"The decline in home prices and presence of deeply discounted foreclosures has increased affordability and enticed bargain hunters," Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report was released. "However, rising unemployment, depressed confidence and expectations of home price depreciation serve as powerful offsets."
Resales had been expected to drop to a 4.45 million annual rate, according to the median projection of 65 economists surveyed by Bloomberg News. The estimates ranged from 4.26 million to 4.75 million.
The February sales rate dropped 4.6% from a year earlier.
The number of unsold homes on the market at the end of February represented 9.7 months' supply at the current sales pace, the same as in January. The group has said a supply of five to six months is usually consistent with a balanced market.
The median price of an existing home decreased 15.5% from a year earlier, to $165,400.
The median listing price rose in California for the first time in three years, according to Lawrence Yun, the real estate agent group's chief economist.
Resales of single-family homes increased 4.4%, to an annual rate of 4.23 million. Sales of condos and co-ops climbed 11.4%, to a rate of 490,000.
All four regions of the country posted an increase in sales last month, led by a 15.6% gain in the Northeast, the group said.
"Now that credit is cheaper, we have more bargain hunters going in, and foreclosure auctions are stepping up," said Guy LeBas, the chief economist at Janney Montgomery Scott LLC in Philadelphia, who had forecast an increase in sales. "We're reaching a point where extreme sales declines will not happen, but we haven't seen stability yet. There's a long ways to go."
Distressed sales are hurting builders. Toll Brothers Inc., the largest U.S. builder of luxury homes, reported its sixth consecutive quarterly loss this month, and Hovnanian Enterprises Inc., New Jersey's largest home builder, has posted 10th straight quarterly losses.
"We expect demand for all homes, both new and existing, to remain far below normalized levels," Ara Hovnanian, the CEO of Hovnanian Enterprises, said this month.