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NAR: Strong March Leads to Weak National Housing Market in April

by James F. McClister

NAR documents 6 percent jump in existing-home sales

existing-home-sales-april-march-2015-NAR-inventory

Market indicators have detailed a continual progression towards normalcy since early 2014, but a hiccup in April’s existing-home sales could mark yet another slow down in the pace of progress, according to a new report from the National Association of Realtors.

In April, total existing-home sales, encompassing all property types, stumbled 3.3 percent from March, which was admittedly uncharacteristically active. Despite month-over-month declines, figures remain above the annual sales pace of five million, and from the same time last year sales have actually jumped 6.1 percentage points – the seventh consecutive month of such increases.

Single-family home sales, which also fell month-over-month, held on to yearly gains, rising 6.5 percentage points, helping to boost the median sales price to $221,200 – a 10 percent year-over-year gain. Condo sales were up 3.4 percent from April 2014.

Inventory remains far below pre-crisis levels at a 5.3-month supply, and 0.9 percent below a year ago. While short-term increases mark a slow refilling of shallow inventories, persistent demand in some of the country’s hottest markets is making it difficult for builders and sellers to keep up. At the current purchase pace, properties are averaging only 39 days on market, which is faster than any time since July 2013 when the average was 42 days. In April, 46 percent of homes sold in less than a month.

The Midwest Prevails

Regionally, NAR’s findings were aligned with the national pace, apart from the Midwest, which stood out as a beacon in an otherwise foggy gulf of slowing existing-home sales.

  • Sales in the Northeast declined 3.1 percent to an annual rate of 620,000, but are 1.6 percent above a year ago. The median price in the Northeast was $253,200, which is 3.6 percent higher than April 2014.
  • In the Midwest, existing, home sales increased 1.7 percent to an annual rate of 1.22 million, and are 13.0 percent above April 2014. The median price in the Midwest was $173,700, up 11.4 percent from a year ago.
  • Existing home sales in the South declined 6.8 percent to an annual rate of 2.04 million, but are still 3.6 percent above April 2014. The median price in the South was $189,400, up 8.5 percent from a year ago.
  • Existing home sales in the West decreased 1.7 percent to an annual rate of 1.16 million, but are still 6.4 percent above a year ago. The median price in the West was $318,700, which is 10.0 percent above April 2014.

Owners Wary of the Market

In a statement accompanying NAR’s report, Chief Economist Lawrence Yun rationalized April’s dip in sales. “April’s setback is the result of lagging supply relative to demand and the upward pressure it’s putting on prices,” he said. “Housing inventory in many markets is very tight, which in turn is leading to bidding wars, faster price growth and properties selling at a quicker pace.”

Helping to frame the situation, Yun added that in April, 40 percent of properties sold above asking price, the highest level since NAR began tacking the data in December 2012.

While some experts point to building as the culprit behind low inventory, Chicago Agent has reported several times on the one-dimensional nature of this analysis. Mark Fleming, chief economist with First American, pointed out that while buyer interest remains high and rising prices bode well for interested sellers, many homeowners still lack the equity to warrant listing their home.

“While individual homeowner equity positions are improving, many homeowners still have a higher than market reservation price, or the price at which they are willing to put their home on the market for sale,” he said. “Without the constraint of insufficient equity, many more homeowners would be willing to sell their homes, especially given the continued low interest rate environment and increased certainty in labor markets.”

Overall, April proved disappointing, but March’s stellar performance may have been enough to help make up the difference.

“Existing-home sales are currently below expectations because it’s hard to be a buyer if at first you can’t be a seller,” Fleming said. “Nonetheless, the big increase in actual sales in March began to close the gap between actual existing-home sales and the market capacity for existing-home sales.”

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