Home sales hit highest rate in 3 years

Home sales shares post best month since November 2009 as rising prices brought both buyers and sellers back to the market.

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.

"The real news is the rise in the inventory," said Paul Diggle, property economist with Capital Economics in a note Thursday. "This is the first increase in supply of any real significance for more than two years. It's too early to say if the trough in supply is behind us, but we get the sense that it's close."

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.

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Federal Reserve sees slow recovery for years to come

Federal Reserve Chairman Ben Bernanke said he has "great concern for the unemployed."

NEW YORK (CNNMoney) The Federal Reserve trimmed its forecast for economic growth in 2013, but said Wednesday that it's a bit more optimistic that the unemployment rate will decline.

The Fed expects the U.S. economy to grow between 2.3% and 2.8% this year, slightly weaker than its prior estimate.

Meanwhile, the central bank expects the unemployment rate to fall to between 7.3% to 7.5% by the end of the year. The unemployment rate was 7.7% as of February.

In a press conference later in the afternoon, Federal Reserve Chairman Ben Bernanke was quick to acknowledge recent data showing that job growth picked up in February. But he also cautioned that strong hiring may not be here to stay.

In the last few years, job growth accelerated in the winter, and then slowed a few months later. Bernanke calls it the "spring slump."

"We have seen periods before where we have had as many as 300,000 jobs for a couple months," he said. "Then things weakened again."

The Fed is also wary about the impact of federal spending cuts and global financial turmoil on the economy. Bernanke cautioned that the Fed alone would probably not be able to "fully offset major economic head winds" arising from those two issues.

Overall, minor tweaks to the Fed's forecasts don't signal any major changes for monetary policy. The central bank still plans to keep its stimulative policies in place, probably until 2015.

Federal Reserve policymakers voted 11-to-1 to keep short-term interest rates near zero, as the Fed has done since December 2008 in an effort to stimulate the economy.

The Fed reiterated that it intends to keep rates low until the unemployment rate falls to 6.5% or inflation exceeds 2.5% a year. Those are rough guidelines, not strict targets. Most Fed officials don't expect those levels to be met until 2015.

Related: Bernanke: There is no stock bubble

The central bank also said it will continue to buy $40 billion in mortgage-backed securities and $45 billion in Treasuries each month for the foreseeable future. The hope is that those purchases will continue to push long-term interest rates even lower.

Bernanke mentioned that the Fed may chose to adjust the volume and pace of those purchases in coming months, in response to economic data.

Esther George, president of the Kansas City Fed, was the only voting member to oppose the decision, citing concerns that the Fed's policies would increase "the risks of future economic and financial imbalances."

The Fed's next meeting is scheduled to take place April 30 to May 1.

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