Existing home sales fell 0.9% in February from January but rose 8.8% from a year earlier, according to the National Association of Realtors.
The trade group's seasonally adjusted index, which includes single-family homes and condos, dropped to 4.59 million annual sales in February from an upwardly revised 4.63 million a month earlier.
Analysts at Capital Economics said February's data suggests a fading boost from unseasonably warm weather across the country, but investor demand and banks more keen on lending could edge sales higher for the rest of 2012.
The median sales price rose 0.3% annually in February to $156,600, as distressed sales made up a lesser percentage of all existing-home transactions. NAR estimates foreclosure and short sales were 34% of the market, down from 35% in January and 39% in February 2011.
Housing inventory grew 4.3% month-to-month to 2.43 million homes for sale, representing a 6.4-month supply.
Inventory levels are expected to continue rising in the coming months as mortgage servicers, particularly those in states with onerous foreclosure processes, are beginning to work their way through backlogs," said Staff Economist Curt Long with the National Association of Federal Credit Unions.
Although the median sales price rose for the first time in nearly two years, "the steady stream of distressed properties expected to hit the market in coming months should suppress prices," Long said. "The recovery has been slow, but the upward trend in sales should continue in the near term.”
A large number of NAR members continued to report contract failures at 31% in February, down from 33% in January but up significantly from 9% February 2011. NAR said in a release that those failures typically come out of declined mortgage applications and appraisals below the negotiated price.
Lawrence Yun, the group's chief economist, said that's contributing to an "uneven sales pattern," but said many buyers continue their search after failed deals.
Investor purchases remained unchanged from January at 23% but rose from 20% in February 2011.
Regionally, the Northeast and West saw 3.3% and 3.2% drops from January, respectively, in existing home sales, while sales rose 1% and 0.6% in the Midwest and South.