May 24, 2010
Buyers rushing to take advantage of an expiring homebuyers' tax credit pumped up existing home sales last month. Whether it was a one-month distortion won't be known until the May numbers are reported next month.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March. The increase didn't really surprise anyone.
"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," said NAR's chief economist Lawrence Yun. "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."
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.10 percent in April from 4.97 percent in March; the rate was 4.91 percent in April 2009 and in recent days has dropped lower.
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, up from an 8.1-month supply 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 in July 2008.
"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."
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.
