by Kathleen Brooks

There was some good news for the battle-scarred housing market today. Sales of previously owned homes shot up over five percent in January, according to the National Association of Realtors. In a statement released this morning, Lawrence Yun chief economist for the NAR credited the jump to bargain hunting first time buyers:

Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February. Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.

The NAR says home prices have fallen sharply this year. The national median existing-home price for all housing was $165,400 in February, down 15.5 percent from a year ago. With prices continuing to fall, the outlook for home sales looks good.

 

There was also some bad news tucked away in this announcement. Housing inventory is rising again, and it could take almost 10 months to clear. New building projects remain unlikely for the rest of the year, bad news for the construction sector and home builders.

Housing sector data is worth keeping an eye on. The housing bust started this financial mess and a housing recovery will be the way to end it.