April Existing Home Sales Fueled by Last Gasp of Tax Credit

Existing U.S. home sales surged an unsurprising 7.6 percent in April from March to an annualized rate of 5.77 million, according to the National Association of Realtors on Monday. Compared with April 2009, sales were 22.8 percent higher.

May 25, 2010
By Dees Stribling, Contributing Editor

Photo of Lawrence Yun courtesy Flickr Creative Commons user tboard

Existing U.S. home sales surged an unsurprising 7.6 percent in April from March to an annualized rate of 5.77 million, according to the National Association of Realtors on Monday. Compared with April 2009, sales were 22.8 percent higher.

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply at the current sales pace, up from an 8.1-month supply in March, noted the organization. Raw unsold inventory is 2.7 percent above a year ago, but remains 11.6 percent below the record of 4.58 million in July 2008.

NAR was careful to attribute the rise to improving consumer confidence and favorable affordability conditions, as well as the 800-lb. gorilla in the room, the now-expired tax credit. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” averred the ever-optimistic Lawrence Yun, NAR chief economist, in a statement.

Apartments Looking Better Now, According to Consumer Survey

The National Apartment Association released the results of a survey of attitudes toward apartments on Monday that found that 76 percent of respondents now deem renting to be the more favorable option to owning a home in the current real estate market, a 5 percent increase from 2008. The survey also found that both renters and homeowners are not eager to make any changes in their housing status within the next year, demonstrating low consumer confidence and continued uncertainty in the housing market.

The survey of more than 2,000 U.S. adults, conducted by market research firm Harris Interactive, also found an increase from a 2008 survey in the number of adults noting the burden of major home repairs or maintenance as a benefit of renting a home vs. owning. Some 64 percent in 2010 said that, compared to 57 percent in 2008.

Why the change in attitude? “It’s clearly the economy, combined with the subprime meltdown, which lowered housing values across the depth and breadth of the United States,” Douglas Culkin, president of the National Apartment Association, told CPE. “In light of that, owning a home may not be–certainly at this time–the great opportunity it has been seen as in the past.”

Chicago Fed Notes Heightened Economic Activity

The Federal Reserve Bank of Chicago reported on Monday that its National Activity Index increased 0.29 in April, up from 0.13 in March. April marked the highest level of the index since December 2006, and the third time this year that it indicated above-average economic activity.

The index is a weighted average of 85 indicators of national economic activity, drawn from production and income; employment, unemployment and hours worked; personal consumption and housing; and sales, orders and inventories. Zero means that the U.S. economy is expanding at its historical trend rate of growth.

Wall Street continued to wobble around on Monday, spending much of the day in positive territory but dipping downward at the end of the trading day. The Dow Jones Industrial Average lost 126.82 points (very close to what it gained on Friday) or 1.24 percent. The S&P 500 declined 1.29 percent and the Nasdaq was off 0.69 percent.