Home Sales Post Third Consecutive Gain

By:: Peter King | May 24, 2010

Existing home sales rose for the third consecutive month in April, as buyers took advantage of a soon-to-expire tax credit, according to a report out this morning by the National Association of Realtors (NAR).

Sales of pre-owned homes rose 7.6 percent during the month, to a seasonally adjusted annual rate of 5.77 million units. It was the highest sales total since November, when buyers were motivated by the credit’s original deadline, before Congress extended it through April.

April’s gain follows a similar increase of 7.0 percent in March. The April rate represents an increase of more than one million units a year compared to the April 2009 rate of 4.70 million, a 22.8 percent annual gain.

Lawrence Yun, NAR’s chief economist, said the gain was expected, due to the expiration of the homebuyer tax credit on April 30. Now that the credit is gone, Yun said that sales are expected to decline somewhat over the coming months, although other favorable trends are emerging.

“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,” he said.

Yun said a majority of housing markets have seen price gains lately, despite an 11.5 percent increase in the inventory of homes for sale in April, which usually would put downward pressure on home values. The median price for homes of all types was $173,100 in April, up 2.0 percent from March and representing a 4.0 percent annual increase from April 2009.

Contributing to the price gain was a decline in the share of foreclosed properties, with distressed homes declining to 33 percent of all sales, down from 35 percent in March.

Investors, who tend to be major purchasers of distressed properties, accounted for only 15 percent of all transactions in April, down from 19 percent in March. Meanwhile, first-time homebuyers, spurred by the tax credit, bought 49 percent of all homes in April, up from 44 percent the previous month.

The biggest gains in home sales were in the Northeast, which posted a seasonally adjusted gain of 211 percent over March, and an annual increase of 41.6 percent. The West was the only region to show a decline for the month of April, with sales down 6.2 percent from March and posting an annual increase of only 5.2 percent, the smallest of all four regions.

Sales in the Midwest were up 29.1 percent for the month and 9.9 percent from one year ago, while in the South, sales were up 23.0 percent for the month and 8.6 percent from April 2009.

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