The federal homebuyer tax credit helped boost existing-home sales again in April, but total housing inventory swelled as homes came on the market faster than they were sold, the National Association of Realtors said today.
With the homebuyer tax credit gone — buyers had to be under contract by April 30 to claim it — NAR Chief Economist Lawrence Yun acknowledged that "no doubt there will be some temporary fallback" in coming months.
But Yun said other factors continue to support housing markets — including mortgage rates that remain near historic lows, and an improving economy and buyer confidence — and that "the housing price correction appears essentially over."
Existing-home sales were up 7.6 percent from March to April, to a seasonally adjusted annual rate of 5.77 million homes. Compared to the same time a year ago, sales were up 22.8 percent. The median home price was up 4 percent from a year ago, to $173,100.
But NAR said first-time homebuyers accounted for 49 percent of home purchases in April, up from 44 percent in March. Investors, who accounted for nearly one in five sales in March, accounted for just 15 percent of transactions in April.
Total housing inventory was up 11.5 percent from March, to 4.04 million existing homes for sale. At the current pace of sales, that represents an 8.4-month supply of homes, up from 8.1 months in March. Analysts generally consider a 6-month supply to be a better balance between supply and demand.
Briefing Realtors at their annual midyear meeting in Washington, D.C., this month, economist Mark Zandi of Moody’s Analytics said that with millions of homes still headed into foreclosure, he expects price weakness for the next six to 12 months and no real price growth through 2012.
The Mortgage Bankers Association estimates that a record-high 4.63 percent of outstanding mortgages were at some state in the foreclosure process at the end of the first quarter, up from 4.58 percent at the end of the year and 3.85 percent a year ago. Distressed homes accounted for 33 percent of sales last month, NAR said, compared with 35 percent in March.
Analysts with Altos Research and Zillow have also sounded warnings that for-sale inventories are likely to grow — not only because of foreclosures, but as sellers who have been waiting for conditions to improve release "pent up supply" onto the market.
In the short term, many analysts expect home sales to cool at least somewhat with the expiration of the homebuyer tax credit, because of the likelihood that it pushed some demand forward.
During the week ending May 14, demand for purchase mortgages was down 24 percent from a year ago, hitting a low not seen since 1997, the MBA said in a separate report.
But Yun said there’s no sign yet that prices are being undermined. NAR said median prices for single-family homes in April were up from a year ago in 18 out of 20 metropolitan statistical areas.
Low interest rates continue to give buyers greater purchasing power. The Federal Reserve in March wrapped up a $1.25 trillion program in which it purchased mortgage-backed securities to keep interest rates low. But since then, the European debt crisis has helped keep rates low. Investors flocked to bonds and other investments that are viewed as safe.
According to Freddie Mac, the rates for 30-year fixed-rate mortgages rose to 5.1 percent in April from 4.97 percent in March.
The 30-year fixed-rate mortgage has since fallen to an average of 4.84 percent for the week ending May 20, Freddie Mac said — near the record low of 4.81 percent recorded during the week ending Dec. 10.
In a May 12 forecast, the Mortgage Bankers Association projected that rates on 30-year fixed-rate mortgages will rise to 5.6 percent by the end of this year, average 6.3 percent in the final quarter of 2011, and reach 6.6 percent at the end of 2012.
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