Existing home sales rose 3.4% to a still-suppressed, 4.62 million-unit rate in April after being revised down for the previous month. The gains were broad-based across regions, but the strongest gains occurred in the Northeast and the West. Even the worst-hit parts of California appear to be firming a bit, with one realtor in the small town of Patterson reporting his inventory has fallen from above 400 to below 20 over the last year. Texas also remains strong, with gains in both trade and the oil industry fueling demand. Much of the trade previously done with Mexico has now shifted from Arizona to Texas, which has resulted in a windfall for the Lone Star State. Mexican companies, in particular, have been spooked by Arizona’s aggressive anti-immigration laws.
Increases were also spread across categories, with single-family sales increasing along with condos and coops. The overwhelming bulk of sales (88.5%), however, remain in the market for single-family homes.
Also, median home values showed signs of firming, but compared to a low level. The median price of a home in April was $177,400, up more than 10% from a year ago, but still off 23% from a peak of $230,300 hit in 2006. Distressed sales edged slightly lower, from 29% of the total in March to 28% in April. Many of the deep discounts we saw just a few months ago are no longer available. Supply remains constrained, especially for turnkey properties, which have sparked reports of bidding wars. Realtors were surprised how few homes were actually listed during the spring housing season, which is making it easier to sell what they have.
That said, financing is still a problem. Realtors warned that buyers should seek pre-approval on financing and work to improve their credit scores to secure a deal. Hence, an unusually large share of sales remain concentrated in the first-time buyer and cash market.
Bottom Line: If you talk to realtors, one would think we are in another housing boom. The reality is that there are very few realtors still standing in the wake of the housing bust, and those few are taking a bigger share of a smaller pie. Indeed, the number of realtors multiplied much faster than sales during the boom. Moreover, lending conditions remain tight and capacity constraints in the construction sector will remain headwinds to a more robust (and now justified) recovery in housing. This will put a damper on how fast the rest of the economy recovers.