The National Association of Realtors (NAR) reported Monday that sales of previously owned homes rose 7.6 percent in April compared to March, reflecting a surge in activity as buyers sought to close deals ahead of the contract deadline of April 30th for the federal homebuyer tax credit.
Last month’s numbers pushed the annual sales rate to 5.77 million units, up from a 5.36 million sales rate in March. The newly released data far exceeded analysts’ expectations. They were projecting an increase, but somewhere between a 5.60 and 5.65 million-unit sales pace. Last year at this time, the sales rate was on track to hit just 4.70 million pre-owned units for the year.
Although, the increase in existing home sales was widely anticipated and a welcome boost to a real estate market still trying to gain some meaningful traction, some warn that the gains recorded over the last couple of months (monthly sales rose 7.0 percent in March), will soon be retracted. With the tax credit, many homebuyers planning to make purchases during the summer season were likely prompted to move those decisions up. But Lawrence Yun, NAR’s chief economist, remains optimistic that a turnaround has taken hold.
“The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” Yun said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy, and mortgage interest rates that remain historically low.”
Eli Tene, a real estate analyst, investor, and president of Panorex Realty in Los Angeles, has a different take. He says the positive news in home sales won’t last.
“I think we are due for another round of foreclosures. Interest rates will rise, and the perfect storm is forming that will lead to a possible spike in interest rates. When this happens, homes sales will have to suffer another negative impact,” Tene explained.
He added, “The housing market is witnessing movement in homes $500,000 or less, but home sales in the higher end are soft. Mortgage financing and approvals continue to challenge borrowers in all markets, despite low interest rates and prove to be a serious challenge and barrier to closing transactions in high-end markets.”
But at least for the short-term, NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Arizona, says that while purchasing traffic may be somewhat mixed, many buyers are staying in the market, even without the tax credit.
“Some Realtors tell us they are very busy with clients who are entering the market now as a result of improved conditions, while others are welcoming a slowdown from frantic market conditions in recent months,” Golder said.
Despite the increase in monthly sales figures, NAR says total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply at the current sales pace. That’s up from an 8.1-month backlog in March.
Raw unsold inventory is 2.7 percent above a year ago, but remains 11.6 percent below the record of 4.58 million homes in July 2008, NAR noted.
“Although inventory levels remain above normal and much of the gain last month was seasonal, the housing price correction appears essentially over,” Yun said. “In fact, a majority of the markets have seen price gains recently. A return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles.”
NAR reported that the national median existing-home price for all housing types was $173,100 in April, up 4.0 percent from April 2009. Distressed homes accounted for 33 percent of sales last month, compared with 35 percent in March, the trade group found.