Existing home sales surged as the home buyer tax credit expired
Existing home sales and prices rose in April. The home sales report issued Monday, which exceeded expectations, is undeniably rare good news for the U.S. economy. However, the surge in national home sales and home sale prices was driven by home buyers rushing to take advantage of the home buyer tax credit 2010, which expired at the end of April. Buyers using the credit have until the end of June to close sales. Industry analysts expect the effects of the subsidy will fade, leaving the real estate market at the mercy of a high U.S. unemployment rate.
Existing home sales beat forecast
Existing home sales increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from the month before, according to the home sales report released by The National Association of Realtors. Loan lenders arranged transactions for 5.36 million existing home sales in March. Sales were up 22.8 percent in April from the same month a year ago. CNNMoney.com reports that the gain in national home sales was widely anticipated, but still beat forecasts. Analysts surveyed by Briefing.com were looking for resales in April to rise to an annual rate of 5.65 million units.
Home buyer tax credit 2010
Existing home sales were pushed up as buyers counted down to the home buyer tax credit 2010 expiration date of April 30. First-time home buyers qualified for a tax credit up to $8,000, while those trading up could score as much as $6,500. Now that the home buyer tax credit is gone, the real estate industry is bracing itself for a bumpy road ahead. the Wall Street Journal reports that last week this anxiety grew when the Commerce Department reported that while home construction rose in April, permits for future building fell off a cliff. The drop showed builders are expecting demand to drop for new homes following a 26.9 percent surge in March.
Home sale prices pushed up by surge
Existing home sale prices were elevated by the surge in buyers taking advantage of the home buyer tax credit 2010. The Washington Post reports that the national median existing home price across all property types — single-family homes, townhouses and condominiums — was $173,100, up 2 percent from March and 4 percent from April 2009. April’s bump is the biggest year-over-year price increase since May 2006. The National Association of Realtors said clearing out the glut of homes has been key to stabilizing prices. The raw number of unsold homes is nearly 12 percent below the July 2008 peak, the group said.
National home sales report
Other figures in the national home sales report include a rise in total inventory of 11.5 percent at the end of April, representing an 8.4-month supply, up from 8.1-month supply in March. That means it would take 8.4 months to sell all the homes for sale at the current sales pace if no more homes are added to the market. Future building permits have dropped sharply because builders know existing home sales will be higher than new home sales going forward. Existing homes usually cost less, and a surging rate of foreclosures is filling the market with dirt-cheap deals.