Existing-home sales remain below underlying demand
After falling in March, existing-home sales increased in April, although they were still not enough to meet underlying demand due to limited inventory and tight credit, reports the National Association of Realtors. All regions recorded year-over-year price gains.
"The powerful combination of all-time low mortgage rates and home prices that were significantly reduced after the housing crisis is fueling demand," says Quicken Loans Chief Economist Bob Walters. "It’s quite likely that we will look back on this period as being among the best times in history to purchase a home. As the economy continues to firm, the likelihood that interest rates will rise increases and home prices will continue their upward climb as well."
In April, existing-home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — rose 0.6% to a seasonally adjusted rate of 4.97 million from an upwardly revised 4.94 million in March. April’s numbers are up 9.7% from the 4.53 million-unit level in April 2012.
Lawrence Yun, NAR chief economist, said the market recovery is solid. "The robust housing market recovery is occurring in spite of tight access to credit and limited inventory. Without these frictions, existing-home sales easily would be well above the 5-million unit pace," he said.
Buyer traffic is 31% stronger than a year ago, according to Yun, but sales are running only about 10% higher. "It’s become quite clear that the only way to tame price growth to a manageable, healthy pace is higher levels of new home construction," he said.
Existing-home sales are hovering at the highest pace since November 2009, when the market saw 5.44 million sales in response to the homebuyer tax credit. This marks the 22nd straight month of year-over-year sales gains and the 14th consecutive month of year-over-year price increases.
Inventory inched up slowly to 2.16 million existing homes available for sale. This represents a 5.2-month supply at the current sales pace versus 4.7 months in March.
The median sales price for existing homes was up 11% year-over-year, reaching $192,800. The last time the nation saw 14 consecutive months of year-over-year price gains was April 2005 to May 2006.
Supply and demand pushed houses off the market at an increasingly fast pace, with the median time on market for all homes at 46 days in April, dropping sharply from 62 days in March. April 2012 saw a median time on market of 83 days.
NAR President Gary Thomas said market conditions have flipped in the past year. "With homes selling in half the time it took to sell a year ago, buyers must be both decisive and prudent," he said. "Advice with contract terms and negotiations is where the expertise of a Realtor shines for both buyers and sellers."
First-time homebuyers made up 29% of purchases in April, compared to 30% in March and 35% one-year prior.
Analysts at Econoday added, "Sales of existing homes appear to have hit stride nicely in the opening of Spring. Yet a threat right now, at least for May sales, is that mortgage rates are suddenly on the rise this month and in a big way, making for big and sudden declines in mortgage activity as seen in the weekly MBA Purchase Applications report posted earlier this morning on Econoday."