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Existing Home Sales Increase In April As Tax Credits End

Dennis Norman

Dennis Norman

Sales increased for second consecutive month-

With the home-buyer tax credits ending April 30th, it’s not surprising that we saw an increase of home sales in March, and now in April, as buyers rushed to buy before the deadline to have a congract of April 30, 2010. According to the latest report from the National Association of REALTORS(R), existing home sales in the US in April increased 7.6 percent to a seasonally adjusted-annual rate of 5.77 million units in April from a revised level of 5.36 million units in March, and increased 22.8 percent from a year ago when the rate was 4.70 million units (seasonally adjusted).

Prices on the rise for second consecutive month –

The median home price in the U.S. in April was $173,100 an increase of 2.1 percent from March’s $169,600 and an increase of 4.0 percent from a year ago when the median price was $166,500.

Inventories on the rise-

For the fourth consecutive month, the number of existing homes for sale in April increased bringing the total to 4,044,000, an increase of 11.5 percent from March and an increase of 2.7 percent from a year ago. The number of months “supply” this inventory represented in April, based upon current sales levels, increased to 8.4 months, up from 8.1 months in March but a 16.8 percent decrease from a year ago when there was a 10.1 month supply.

Local Hot Spots –

NAR publishes existing home sales for 20 major metropolitan areas of the U.S. Highlights from that report include:

  • Portland, Oregon for the second consecutive month, saw the largest annual increase in existing home sales in April with an increase of 49.2 percent in sales from a year ago.
    • Pittsburgh, Pennsylvania was number two with a 42.2 percent increase in existing home sales from a year ago.
    • Boston, Massachusetts was number three with a 41.8 percent increase in existing home sales from a year ago.
  • Indianapolis, Indiana led the way in price increases from a year ago, with April’s median home price of $124,600 representing a 17.1 percent increase from a year ago when the median price was $106,400.
    • Phoenix, Arizona came in second with a median price of $144,700, a 16.2 percent increase from a year ago when it was $124,500.
    • San Diego and Miami/Ft Lauderdale fell in behind Phoenix with annual median price increases of 15.4 percent, and 14.8 percent respectively.

Lawrence Yun, NAR chief economist, said the gain was widely anticipated. “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,” he 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.”

I don’t like “seasonally adjusted rates of sales”:

If you have been reading my posts for a while you know by now I don’t like “seasonally adjusted” numbers (nor does Standard & Poors now either as I wrote about), particularly when artificial stimuli, such as homebuyer tax-credits, can cause an unseasonal spike in sales activity. I much prefer to see the actual numbers and try to garner from them what is going on in the housing market.

The following are the ACTUAL Existing Home sales reported by NAR without any adjustment or fluff:

  • There were 521,000 existing homes sold in April which is a 21.4 percent increase from March and a 26.2 percent increase from a year ago.
  • Below are highlights from each region:
    • Northeast – 94,000 homes sold in April, an increase of 40.3 percent from March and an increase of 42.4 percent from the year before.
    • Midwest – 120,000 homes sold in April, an increase of 21.2 percent from March and an increase of 33.3 percent from the year before
    • South – 191,000 homes sold in April, an increase of 19.4 percent from March and an increase of 26.5 percent from the year before.
    • West – 116,000 homes sold in April, an increase of 12.6 percent from March and a increase of 9.4 percent from the year before.

Other highlights of the NAR Report:

  • Distressed sales accounted for 33 percent of all home sales in April, down from 35 percent in March.
  • First-Time homebuyers accounted for 49 percent of the home sales in April, up from 44 percent in March.
  • Investors were the buyers of 15 percent of the homes in April, down from 19 percent in March.
  • Repeat home buyers were responsible for approximately 36 percent of April’s sales down from March’s 37 pecent..

My Take On the Numbers:

For the past two months I have said that I am encouraged by the sales numbers as I am again this month. However I continue to echo my caution that I’m confident this boost is artificial and has been brought on by the homebuyer tax credit program coming to an end. The spring season has brought more homes on the market thereby increasing inventory, but the months supply doesn’t look bad at 8.4 months….but remember, that is based on a “seasonally adjusted” sales rate of 5.77 million homes; a rate that cannot and will not be sustainable in my opinion.

I think in May we will see “Pending Home Sales” drop significantly from April but we will still see an increased level of “Existing Home Sales” (although not at as high of level as April) as NAR counts “closed home sales” in this data, and since people that went under contract to buy before the April 30th deadline have until July 31st to close the sale, we won’t see the full effect of no tax credits on existing home sales until August.

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