The rising number of distressed sales forced home prices down to their lowest level in nearly nine years, a troubling sign for the struggling housing sector.
The National Association of Realtors said Wednesday that sales of previously occupied homes rose slightly last month to a seasonally adjusted annual rate of 5.36 million. That's up 2.7% from 5.22 million in December.
Still, the pace is far below the 6 million homes per year that economists say represents a healthy market. And the number of first-time home-buyers shrunk to 29% of the market — the lowest percentage of the market in nearly two years. A more healthy level of first-time home-buyers is about 40%, according to the trade group.
Foreclosures represented 37% of sales in January. And all-cash transactions accounted for 32% of home sales — double the rate from two years ago when the trade group began tracking these deals. In places like Las Vegas and Miami, cash deals represent half of all sales.
One reason cash sales are rising is that a growing number of purchases are being made by investors, the Realtors group said.
Millions of foreclosures have forced down home prices and more are expected this year. The median price of a home sold in January was $158,800. That's a decrease of 3.7% from a year ago and the lowest point since April 2002.
"Home prices continue to languish," said Steven Wood, chief economist for Insight Economics. "Any recovery will be difficult to sustain given the still-large supplies of homes for sale and distressed properties."
A major barrier for first-time home-buyers is tighter lending standards adopted since the housing bubble burst. These have made mortgage loans tougher to acquire. Banks are also requiring buyers put down a larger down payment. During the housing boom, buyers could purchase a home with little or no money down.