The Wall Street Journal

24 May  2010

Existing Home Sales Increase

U.S. existing-home sales climbed above expectations during April, as buyers took advantage of the Obama administration’s first-time home-buyer tax credit.

Home resales increased by 7.6%, to a 5.77 million annual rate from a revised 5.36 million in March, the National Association of Realtors said Monday. Originally, home sales in March were estimated rising by 6.8% to 5.35 million.

Economists surveyed by Dow Jones Newswires expected sales last month to climb 4.7%, to a rate of 5.60 million.

The NAR said April inventories increased, while prices rose as well.

Two tax breaks have been enacted for first-time buyers over the past 15 months. The second credit ran out at the end of April, leaving behind fear that the housing market will falter without government support. Anxiety grew last week when the Commerce Department reported that, while home construction rose in April, permits for future building fell sharply. The tumble signaled builders might expect demand to drop for new homes following a 26.9% surge in March.

High U.S. joblessness is scaring off would-be buyers. But sales of existing homes might fare better than the new-home market going forward. Used homes are generally cheaper. And the wave of foreclosures that has hit the market has ushered in some dirt-cheap deals.

Aside from low prices and tax relief, borrowing costs are subdued. The average 30-year mortgage rate was 5.10% in April, up from 4.97% in March, according to Freddie Mac.

Year over year, existing-home sales were up 22.8% in April.

“Although inventory levels remain above normal and much of the gain last month was seasonal, the housing price correction appears to be essentially over,” NAR economist Lawrence Yun said. He projected a “temporary fallback” for existing homes sales months in coming months, as the tax credit expired.

Inventories of used homes increased by 11.5% at the end of the month to 4.04 million available for sale. That represented a 8.4-month supply at the current sales pace, compared to a 8.1-month supply in March.

The median price for an existing home was $173,100 in April, up 4.0% from April 2009. March’s median home price was revised down to $169,600.

Regionally, April sales increased 21.1% in the Northeast, 9.9% in the Midwest and 8.6% in the South.

Sales declined 6.2% in the West.