May 24, 2010

Existing Home Sales Jumped 7.6% in April, Reflecting Tax Credit

5.77 million homes sold this April versus 4.70 million a year ago

U.S. existing home sales rose again in April, up 7.6%, with buyers motivated by the federal tax credit, improving consumer confidence, and affordable rates and prices, the National Association of Realtors (NAR) reported Monday, May 24.

The 5.77 million single-family houses, townhomes, condos, and co-ops sold this April compares to only 4.70 million units sold in April 2009. Monthly sales rose 7.0% in March.

"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," said NAR Chief Economist Lawrence Yun in a statement. "For people who were on the sidelines, there's been a return of buyer confidence with stabilizing home prices, an improving economy, and mortgage interest rates that remain historically low."

Yun noted that the gain was widely anticipated, but the rise in sales exceeded analysts' expectations that 5.65 million homes would be sold in April. Retail stock prices rose on the news.

"The pending home sales index [in March] clearly signaled a sharp rise in sales, but this is a bit stronger than it implied. The increase in activity is clearly due to the tax credit, which required buyers to sign contracts by April 30 and close by June 30," said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., Valhalla, New York, in an analyst note.

Existing sales numbers are captured at the point of closing, so the May and June numbers will likely be strong but followed by steep summer declines, Shepherdson said, adding that overall supply is now rising quickly as would-be sellers see a chance to move their properties.

As reported by NAR, the national median existing-home price for all housing types was $173,100 in April, up 4.0% from April 2009. The national average for a 30-year, fixed-rate conventional mortgage rose to 5.10% in April versus 4.97% in March, according to Freddie Mac.

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