Low Prices Help Increase Existing-Home Sales

The Wall Street Journal


Existing-home sales rose last month, as distressed properties and low prices helped bolster the market.

The National Association of Realtors said Wednesday that sales of previously owned homes rose 2.9% in April, compared with March, to a 4.68 million annual rate. The increase nearly reversed March’s decline, though the sales were 3.5% below the level in April 2008.

“Home sales keep chopping around,” said J.P. Morgan Chase & Co. economist Michael Feroli. “We’re seeing continued evidence that things are stable, albeit at very low levels.”

Sales of distressed properties, such as homes in foreclosure, accounted for 45% of the April total, down from exactly half in March. Those sales are driving prices lower; the average selling price of $170,200 was 15.4% below the year-ago level.

The drop in home prices is aggravating many households’ woes: Because the value of their homes has fallen below what they owe on their mortgage, they can’t clear their debt by selling.

A separate government report suggests that the home-price declines may not be as severe as those shown by the National Association of Realtors, a trade association. The Federal Housing Finance Agency said its national housing-price index was 7.1% below its year-ago level in the first quarter, compared with the fourth quarter’s year-over-year decline of 8.3%. Nevada registered the steepest decline, with prices falling 31.1%.

The Realtors’ home-price measure can be distorted by the mix of homes sold in a month. If fewer high-end homes are sold, for example, that will drive the price measure down. The government measure avoids these problems by including only homes with financing from Fannie Mae and Freddie Mac. It also doesn’t include homes with subprime mortgages, which have made up the bulk of the housing-market problems.

The separate S&P/Case-Shiller national home-price index, which fell 19.1% in the first quarter, avoids the distortions of the Realtors, and includes homes with subprime mortgages. But because it is based on prices in the 100 largest metropolitan areas, its scope isn’t as wide as the government’s.