Existing Home Sales Rise, but So Does Inventory
An uptick in hiring, still-low mortgage rates, and a pent-up demand are working to create a more robust housing market than last year, especially in markets in the Northeast and Northwest. A strong April, boosted by the tax-credit deadline, kicked off the all-important buying season: The National Association of Realtors reported that sales of existing homes rose 7.6 percent in April from the same month in 2009.
But there is one more thing to consider in this equation: The number of homes on the market actually increased from March to April. The 4.04 million homes for sale across the country, and 11.5 percent jump from March, equal an 8.4-month supply, given the current pace of sales.
At least the numbers -- even the anemic ones -- are headed in the right direction.
Sales were strongest in Portland, Ore., which saw a 49.2 percent gain. Rounding out the regions withe the biggest increases were Pittsburgh (42.2 percent), Boston (41.8 percent) and the New York City metropolitan area (39.6 percent).
NAR Chief Economist Lawrence Yun says the gain was not a total surprise: "The upswing in April existing home sales was expected because of the tax credit inducement ... but other factors are also supporting the market. 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."
Even with the expiration of the tax credit, agents are expecting to see residual buyers -- those who sold their homes and are now in the market to "trade up," says NAR spokesperson Walter Molony.
"Those who sold their houses will be closing in the next month or so. They will be looking to buy, whether it's an existing home or new construction."
But the strong sales numbers are not enough to take care of the housing surplus. The increase in the number of homes on the market is attributable to a number of factors: spring-summer is a traditional time to put a home up for sale; sellers, encouraged by the increase in homes purchased, have more confidence in the market; and foreclosures remain high in some parts of the country. But that number is enough to give some real-estate watchers pause, as they assess what will happen in coming months.
"The 'used' home market is still oversupplied, and will remain that way for some time thanks to a continuing influx of distressed and foreclosed property," Mike Larson of Weiss Research, a global investment research firm, wrote in an analysis of the April numbers. "We're also going to see yet another hangover in the coming couple of months due to the tax credit's expiration, with sales rates dropping off." Larson called it an "anemic recovery," that will take several more quarters before the market comes back full force.
There's some agreement that the market will take a breather later this summer, after the heaviest buying season -- right before a new school year -- comes to an end. But many say the worst is over, and the market is beginning to stabilize.
The bottom line: It's still a buyer's market, even in the areas where sales are up.
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