Implications: Existing home sales rose slightly in April and reached the highest sales pace since November 2009, when sales were artificially boosted by an $8,000 homebuyer tax credit. Sales appear to have leveled off over the past several months but are still up 9.7% from a year ago. We expect sales to renew an upward push over the next few months. The months' supply of existing homes (how long it would take to sell the entire inventory at the current selling rate) rose to 5.2 in April. However, this is no cause for worry and may even be more of a good sign as low inventories have probably been holding back the sales pace. Just a year ago, the months' supply was 6.6 and was 9.3 two years ago, so a supply of 5.2 months is still relatively low. What we are probably seeing lately is some more marginal sellers coming back into the market as pricing power recovers. The 11% gain in median prices versus a year ago can be attributed to a couple of factors. First, low inventories while demand is picking up. Second, fewer distressed sales and more sales of larger homes. Homes priced from $0-$100,000 were down 9.8% from a year ago while $1,000,000+ homes are up 41.9%. In general, it still remains tougher than normal to buy a home. Despite record low mortgage rates, home buyers face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 32% of purchases in April versus a traditional share of about 10%. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it's a great time to buy.
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Posted on Wednesday, May 22, 2013 @ 11:10 AM
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