By Mike Colpitts
Existing home sales jumped for the first time in three months in April, rising 3.4% to a seasonally adjusted rate of 4.62 million units, and are 10% higher than a year ago, according to the National Association of Realtors. Home prices also showed some improvement.
However, homes listed on the market for sale also took a jump, climbing 9.5% in preparation for the busy summer home buying season. The inventory of homes rose to 2.54 million units, enough to take 6.6 months to sell off at the current rate of sales. Six months inventory is usually considered healthy for the housing market, but an increasing share of homes in default of their mortgages plague the market.
The delinquency rate hit 7.12% in April, an increase of 0.4% from the prior month, according to Lender Processing Services. An estimated 3.52 million homes were in default at the end of April 30 days or more. About 1.6 million are 90 days or more in default and the most likely to experience a foreclosure or go through a bank assisted short sale.
A combination of lower home prices and record low mortgage rates drove the jump in sales, enough for NAR chief economist Lawrence Yun to claim a housing recovery is underway. “It is no longer just the investors who are taking advantage of high affordability conditions,” said Yun. “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.”
The national median existing-home price jumped 10.1% to $177,400 in April from a year ago, the NAR said. “This is the first time we’ve had back-to-back price increases from a year earlier since June and July of 2010 when the gains were less than one percent,” Yun said. “For the year we’re looking for a modest overall price gain of 1.0 to 2.0%, with stronger improvement in 2013.”
However, a lack of inventory also produced multiple offers in some areas of the nation as discount priced distressed sales shrank, accounting for only 28% of April sales, down from 29% in March and 37% a year ago.
Foreclosures sold by NAR members closed for an average discount of 21% below market values in April, while short sales were discounted a lesser 14%. A large supply of foreclosed property is expected to hit the market later this year, but much of the inventory may be sold-off by bankers as short sales instead as lenders increase the share of sales they are accepting with less than what is owed on a mortgage instead of foreclosing.
Record low mortgage rates are also helping the housing market. Freddie Mac said the national average commitment rate for a 30-year, conventional fixed rate mortgages declined to 3.91% in April from 3.95% during March. The average rate on the same loan hit 3.83% last week, the lowest in the history of the giant mortgage lender.