U.S. Previously Owned Home Sales Climb to Three-Month High

Sales of previously owned homes increased in April to a three-month high, led by a surge in the Midwest and indicating further improvement in the housing market during the busy spring-selling season, National Association of Realtors data showed Friday.

Key Points

  • Contract closings rose 1.7 percent to a 5.45 million annual rate (forecast was 5.4 million)
  • Purchases climbed 4.9 percent from April 2015, before seasonal adjustment
  • Median price of an existing home rose 6.3 percent from April 2015 to $232,500, the highest since June 2015
  • Sales in the Midwest jumped 12.1 percent to a 1.39 million pace, the strongest since December 2006; purchases were also up in the Northeast
  • Inventory of available properties dropped 3.6 percent from April 2015 to 2.14 million units

Big Picture

The increase caps a six-month period of greater-than-usual volatility in purchases and may indicate that the housing industry is returning to a more stable growth path on the back of solid hiring and cheap borrowing costs. At the same time, limited inventory is keeping prices elevated, while first-time buyers have been slow to enter the market, curbing housing’s contribution to economic growth.

Economist Takeaways

  • “The demand side is fairly solid -- you have ongoing job and income growth, you still have favorable mortgage rates and you’re seeing increased household formation,” said Richard Moody, one of the best forecasters of existing-home sales over the past two years, according to data compiled by Bloomberg. “Whether it’s new construction or existing homes, the brake on the pace of activity is the supply side.”
  • The Midwest “is the most affordable region of the country and that’s where the buyers still remain strong,” Lawrence Yun, NAR chief economist, told reporters as the figures were released. “The tight inventory condition still persists and a housing shortage is still present.” Generally, “there’s plenty of room to grow” in the housing market, he said.

The Details

  • At the current pace, it would take 4.7 months to sell those homes, compared with 4.4 months in March. Less than a five months’ supply is a tight market, the Realtors group has said.
  • Properties on market for 39 days in April, unchanged from year ago and shortest duration since June 2015
  • Home prices on a year-over-year basis have increased for 50 straight months
  • Single-family home sales increased 0.6 percent to an annual rate of 4.81 million while multifamily properties that include condominiums climbed 10.3 percent to a 640,000 pace
  • First-time buyers accounted for 32 percent of all sales, up from 30 percent in March
  • Sales of distressed properties made up 7 percent of all April purchases, with foreclosures making up 5 percent and short sales 2 percent
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