Home sales hit highest rate in three years

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

NEW YORK (CNNMoney) — Sales of previously-owned homes reached an annual rate of nearly 5 million in February, the strongest pace in more than three years.

The report Thursday from the National Association of Realtors was the latest sign of a housing recovery that has become a major positive force for the economy.

The February rate of 4.98 million homes was up 10% from a year earlier, although it was only 1% higher than the revised January pace.

It was the best month since November of 2009. But that early spike in sales was caused by a temporary $5,000 tax credit for home buyers in place at that time. The current strength is due to improved fundamentals, including a drop in foreclosures and near record low mortgage rates. A decline in the nation’s unemployment rate is also helping.

The median sales price in the month was $173,600, up nearly 12% from a year ago and in keeping with the trend of rising home prices. The rising prices may have prompted some more people to put their homes on the market as the supply of homes for sale rose for the first time since July. But the supply was still very tight — only about a 4.7 month supply at the current sales pace.

Distressed home sales, which include foreclosures and short sales sold for less than is owed on the mortgage — accounted for 25% of February sales, up slightly from January but well below the 34% share of the market a year ago.