Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.
Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.
Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.
“We’re near minimalist levels right now,” David Resler, chief economist at Nomura Securities International Inc. in New York, said before the report. “Housing isn’t going anywhere.”
Estimates for home sales ranged from 5.09 million to 5.40 million, according to the median of 75 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low 4.91 million last year.
Another report today from the Labor Department showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000. Economists projected 420,000, according to the median forecast in a Bloomberg survey.
Cash Transactions
Of all purchases, cash transactions accounted for 31 percent after a record 35 percent in March, NAR chief economist Lawrence Yun said in a press conference as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 37 percent of the total after 40 percent in March, Yun said.
“We still have a very large foreclosed, distressed inventory that needs to be worked through,” Yun said.
Existing-home sales decreased in three of four regions in April, led by a 7.5 percent drop in the Northeast. Purchases climbed in the Midwest.
The median sales price fell 5 percent last month from April 2010 to $163,700.
Housing Inventory
The number of previously owned homes on the market rose to 3.87 million in April from 3.52 million. At the current sales pace, it would take 9.2 months to sell those houses, the longest since November, compared with 8.3 months at the end of March. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the unsold supply of existing houses already on the market.
More than half of U.S. homeowners and renters say housing won’t recover until at least 2014, according to a survey released yesterday by Trulia Inc. and RealtyTrac Inc., collectors of real-estate data.
The survey, taken in April, found that 54 percent of respondents don’t expect a recovery for at least three years, up from 34 percent in November. Those who see a turnaround by the end of next year fell to 15 percent.
Home Foreclosures
Homebuilders are seeing no gain in demand as they are forced to compete with cheaper, foreclosed properties. Builders began work on 523,000 houses at an annual rate in April, down 11 percent from the prior month, the Commerce Department reported this week. Housing starts dropped to a record low of 478,000 in April 2009.
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop. “We feel it could still be a struggle in 2012.”
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
