Existing home sales slip in April

Sales of previously owned homes slipped in April as the housing marking remains sluggish while the broader economy recovers. 

Existing-home sales fell 0.8 percent last month to a seasonally adjusted annual rate of 5.05 million units, from a downwardly revised 5.09 million in March, the National Association of Realtors said Thursday. 

Sales are 12.9 percent below the 5.8 million pace in April 2010 as a federal home buyer tax credit pushed up sales in April and May a year ago, before slumping through the summer. 

Nonetheless, sales are well below the 6 million level that economists say reflects a healthy market.

Despite near-record low mortgage rates, the market is still faced with high levels of unemployment, rising foreclosures, dropping prices and tight lending requirements, complicating the situation for potential buyers. 

"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.”

Wet spring weather also might be playing a role in unusually slow sales. With some improvement heading into the summer months, sales could accelerate, economists predict.

Purchases made by first-time homebuyers rose 3 percent to 36 percent, although that's still below the 40 percent NAR says is consistent with an improving market. 

All-cash transactions stood at 31 percent in April, down from a record level of 35 percent in March, compared to 26 percent in March 2010, with investors accounting for the bulk of cash purchases.

Many would-be buyers are holding off on purchases because of dropping prices and tough lending standards. 

“Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards,” Yun said.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the lending community needs to return to sensible standards. 

“We want to ensure that qualified buyers will be able to own their property on a sustained basis from a sound credit evaluation, but banks needn’t be so stingy as to only lend to those with the highest credit scores,” he said.

Sales reached their peak of about 7.1 million homes in 2005 before dropping to a 13-year low last year, reflecting the great swing in the market caused by the housing bust. 

Home prices are falling with the national median price for all housing types at $163,700 in April, 5 percent below April 2010. 

Distressed homes, typically sold at a 20 percent discount, accounted for 37 percent of sales in April, down from 40 percent in March and 33 percent in April 2010.

Foreclosure sales fell in the first quarter and likely dropped because of a backlog caused by state and federal investigations into the repossession process by banks. 

Foreclosures are expected to rise 20 percent above last year's 1 million figure, RealtyTrac said earlier this year. 

The California-based group also said prices should bottom out this spring. 

Still, despite the delays of foreclosures, there's no shortage of homes on the market. In April, supply increased to nearly 3.9 million, meaning it would take about nine months to sell all the inventory. A healthy market would have about six months' worth of homes. 

Sales fell across most regions of the country. 

In April, sales were down 7.5 percent in the Northeast, 1.6 percent in the West and 1 percent in the South. But they were up 5.7 percent in the Midwest.

Sales of single-family homes fell 0.5 percent to an annual rate of 4.42 million homes sold. Sales of condominiums fell 3.1 percent to a rate of 630,000 units.