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Once-tentative signs of a housing recovery are hardening into a more solid foundation, lifting prospects for a sector that's been a major drag on the economy.
The latest signal came from existing-home sales, which rose 3.4% in April vs. March, according to National Association of Realtors data out Tuesday. While the annualized rate of 4.62 million units was slightly below forecasts, the gains were broad and echoed reports of rising new home sales and construction.
"There is a genuine rebound occurring in the housing market," said Celia Chen, a senior director at Moody's Analytics.
The data helped send major U.S. stock market indexes up during the trading day, before other news erased gains. Homebuilders like PulteGroup (PHM - News) rose, along with Home Depot (HD - News) and top lenders like Bank of America (BAC - News) and JPMorgan Chase (JPM - News).
Data out last week showed homebuilder sentiment at a five-year high. April housing starts rose, and building permits for single-family homes were higher.
Overall, housing is turning up slowly, Chen said. Activity is still far below pre-bust levels.
"It's a very weak upward trend," she noted.
The median price of existing homes jumped 7.6% in April vs. March to reach $177,400.
Compared with a year ago, prices were up 10.1%, the biggest increase in more than six years.
More sellers were drawn back to the market. The number of homes for sale spiked 9.5% from the prior month to 2.54 million, though they are still almost 21% below year-ago levels.
The sharp price rise isn't all due to more demand, Chen said. It could also reflect a different mix of homes sold in April vs. March.
Investors looking for cheap properties to rent out have also been supporting prices, she added. Distressed sales are drawing interest from Wall Street hedge funds, and banks are experimenting with ways to convert owners to renters.
A still-large inventory of distressed homes hangs over the market. While a predicted flood of foreclosures hasn't yet materialized, Chen sees a steady rise that will bring prices down somewhat later in the year.
But the momentum is shifting.
A few months ago the housing market seemed to have turned a corner, said Lawrence Yun, NAR chief economist. "2012 looks to be a breakout year," he said.
Sales are being driven by affordability, modest job creation and rising rents, he said. First-time buyers are more active, and sales of foreclosed properties are improving.
Foreclosures and short sales sold at deep discounts made up 28% of April sales, down from 29% in March and 37% a year earlier, the NAR said.
Homeowners seriously delinquent on their mortgage are also down from last year, reducing the "shadow inventory" of homes that may become distressed sales.
The housing boom led to underdevelopment of rental properties, and the bust caused more people to shift to renting.
Rents are rising, and as renters get squeezed, some see owning as attractive again, Yun said.
Sales of existing single-family homes rose 3% to an annual rate of 4.09 million. Overall sales and median prices were higher in all four geographic regions.
by Investor's Business Daily May 22, 2012