Existing home sales managed to once again overcome today’s low-inventory environment and move higher for the second consecutive month, according to the National Association of Realtors' latest report.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 1.7% to a seasonally adjusted annual rate of 5.45 million in April from an upwardly revised 5.36 million in March. After last month’s gain, sales are now up 6.0% from April 2015.
Last month’s report marked a real rebound in existing home sales after choppiness in activity this year from unevenness in the rate of new listings coming onto the market.
“April’s rise continues an upward trend in the rate of home purchases. Despite rising prices and a shortage of listings in the many markets, buyer demand continues to hold strong. The year-over-year growth is encouraging to see as further proof that the economy continues to gain steam,” said Quicken Loans Vice President Bill Banfield.
This strong existing home sales report comes during a time low inventory and outrageous home prices. But despite this environment, existing-home sales are predicted to have a strong year and close out 2016 as the best year in a decade.
Lawrence Yun, NAR chief economist, said April’s sales increase signals slowly building momentum for the housing market this spring.
“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” he said.
“Except for in the West – where supply shortages and stark price growth are hampering buyers the most – sales are meaningfully higher than a year ago in much of the country.”
When broken up by region, April existing-home sales in the Northeast climbed 2.8% to an annual rate of 740,000, and are now 17.5% above a year ago. The median price in the Northeast was $263,600, which is 4.1% above April 2015.
Growing the most, Midwest’s existing-home sales soared 12.1% to an annual rate of 1.39 million in April, and are now 12.1% above April 2015. The median price in the Midwest was $184,200, up 7.7% from a year ago.
Existing-home sales in the South declined 2.7% to an annual rate of 2.19 million in April, but are still 4.3% above April 2015. The median price in the South was $202,800, up 6.5 percent from a year ago.
Similarly, existing-home sales in the West fell 1.7% to an annual rate of 1.13 million in April, and are 3.4% lower than a year ago. The median price in the West was $335,000, which is 6.5% above April 2015.
While the South and West struggled, the majority of the market can thank the temporary relief from historically low mortgage rates for preserving housing affordability and boosting sales.
However, there’s growing concern a number of buyers will be unable to find homes at affordable prices if wages don’t rise and price growth doesn’t slow, said Yun.
The median existing-home price for all housing types in April was $232,500, up 6.3% from April 2015 ($218,700). April’s price increase marks the 50th consecutive month of year-over-year gains.
Total housing inventory at the end of April increased 9.2% to 2.14 million existing homes available for sale, but is still 3.6% lower than a year ago (2.22 million). Unsold inventory is at a 4.7-month supply at the current sales pace, up from 4.4 months in March.
“Looking ahead, with demand holding steady and supply levels still far from sufficient, the market for entry-level and mid-priced homes will likely continue to be the most competitive heading into the summer months,” says Yun.
So far this spring has yet to take off due to a flurry of factors that are growing into the "perfect storm" to hinder housing, explained Kevin Golden, director of analytics with a la mode, at the Mortgage Bankers Association’s Secondary Market conference in New York City.