Many housing experts are asking the same question: Is the spring home buying season finally kicking into gear?
Existing home sales increased 1.3 percent from March to April, moving the seasonally adjusted annual rate to 4.65 million from 4.59 million. Yet the gains haven't prompted‡ much optimism from Lawrence Yun, chief economist of the National Association of Realtors.
"Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point," Yun said. "Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year."
Home inventory at the end of April rose 16.8 percent to 2.29 million units as a plethora of existing homes prepare to be listed. The increase gives the housing market a 5.9-month supply of homes at the current sales pace, which is a much more balanced market than the 5.1 months of inventory seen in March. Meanwhile, unsold inventory is 6.5 percent higher than a year ago when a 5.2-month supply was prevalent.
"We'll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough sellers in many areas," Yun said. "More inventory and increased new-home construction will help to foster healthy market conditions."
Lindsey Piegza, chief economist for Sterne Agee, said a recent surge in sales still hasn't been enough to offset back-to-back months of lethargic sales to start the year.
"Industry insiders remain cautiously optimistic as we head into the key spring selling season, but with prices on the rise, many potential home-buyers are reportedly being priced out of the market," she said. "Going forward, if housing values continue to escalate, easier lending standards may be needed to ramp up housing activity."
Interest rates dropping?
In news that could spur more buyers into the market, Freddie Mac announced that mortgage interest rates have continued to drop‡ and have reached a six-month low in May.
"We anticipate economic growth to gain momentum in the second quarter and remain firm throughout the rest of this year," said Doug Duncan, Fannie Mae's chief economist.
Bill Banfield, Quicken Loans vice president, was pleased to hear about the lower rates, noting that the late sales increase for the spring housing market is showing consumers still have confidence in the economy. He believes the best notion is the surge in home inventory.
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