Home Sales Lag Slightly, Market Underperforms

Existing home sales saw a slight downturn in April, according to the National Association of Realtors. While sales were down, however, the market has gained during six of the past nine months, the NAR report notes.

Home sales fell 0.8%, to a seasonally adjusted rate of 5.05 million. The numbers show a 12.9% decline year-over-year, from a 5.8 million pace in April 2010—but that month experienced a surge due in large part to the home buyer tax credit.

“Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger,” said Lawrence Yun, NAR chief economist. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations.”

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Another NAR survey found that 11% of Realtors reported cancelled contracts in April due to appraisals coming in below the buyer-seller negotiated price. Additionally, 10% had contracts delayed and 14% said they saw contracts renegotiated to lower sales prices due to low appraisals.

Also according to NAR, housing inventory at the end of April increased 9.9% to 3.87 million existing homes available for sale, which represents a 9.2-month supply at the current sales pace; up from an 8.3-month supply in March.

View the full report from NAR.

Written by Elizabeth Ecker

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  • Actual inventory is rising.  We are at the end of traditional spring selling season.  With the home affordability index at all time highs, NAR once again sees the light at the end of the tunnel this time due to “pent up demand.”  Really?  Where?  This is one of the main reasons I left CAR and NAR years ago despite being a California real estate broker for well over 15 years.
     
    If NAR is discussing those with homes who are sometimes described as homeowners with “pent up” supply, then they have a point since most of those who would sell their homes if values were higher (“pent up” supply) will end up buying another home.  However, in that case “pent up” demand will materialize into tangible sales if the currently owned home has at least reached the existing inventory stage in the sales process.
     
    If NAR is discussing not only the homeowners with “pent up” supply but also all those who are NOT currently homeowners but want to be, well that is fantasyland until such time as unemployment drops significantly and worker pay rises.  Most employment prognosticators are predicting that reported unemployment will remain over 8% past the 2012 Presidential election.
     
    Builders talk about “shadow demand.”  It is hard to believe that either “pent up” or “shadow” demand will have much of an impact on the housing market until at least mid 2013.  At least that is how many builders are looking at it.  My money is on the builders, not NAR.

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