Tighter Lending Standards Affect April Existing-Home Sales
Washington, DC -- Total existing-home sales including single-family, townhomes, condominiums and co-ops fell 2.6% to a seasonally adjusted annual rate1 of 5.99 million units in April from an upwardly revised level of 6.15 million in March, and are 10.7% lower than the 6.71 million-unit pace in April 2006.
Lawrence Yun, National Assn. of REALTORS senior economist, isn’t surprised. “We’ve been anticipating slower home sales because many subprime loan products are no longer available,” he said. “In addition, increased scrutiny by lenders is stopping risky mortgage origination, which is good for both consumers and the lending community. Fortunately, a wide availability of conventional mortgage products and the 4.5 million jobs created over the past 24 months will help to stabilize the market going forward.”
The national median existing-home price(2) for all housing types was $220,900 in April, down 0.8% from April 2006 when the median was $222,600. The median is a typical market price where half of the homes sold for more and half sold for less, but there is a downward skew in the current national comparison because sales have shifted away from many high-cost areas during the last year.
NAR President Pat V. Combs, from Grand Rapids, MI, and vice president of Coldwell Banker AJS-Schmidt, said historically low mortgage interest rates continue to support the housing market. “Long-term financing remains favorable, but interest rates are rising,” she said. “Although some buyers have a wait-and-see attitude regarding home prices, they should consider that rising interest rates later this year could offset a lower sales price when you get down to the monthly payments.
“Because all real estate is local and conditions vary widely, buyers should consult with a REALTOR® for expertise on conditions in their area,” Combs said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.18% in April, up from 6.16% in March; the rate was 6.51% in April 2006. This week, Freddie Mac reported the fixed rate jumped to 6.37%.
Total housing inventory rose 10.4 percent at the end of April to 4.20 million existing homes available for sale, which represents a 8.4 month supply at the current sales pace, up from a 7.4 month supply in March.
Single-family home sales declined 2.4% to a seasonally adjusted annual rate of 5.22 million in April from an upwardly revised 5.35 million in March, and are 11.2% below the 5.88 million-unit level in April 2006. The median existing single-family home price was $220,500 in April, which is 0.9% below a year ago.
Existing condominium and co-op sales fell 3.8% to a seasonally adjusted annual rate of 770,000 units in April from a level of 800,000 in March, and are 7.7% lower than the 834,000-unit pace in March 2006. The median existing condo price3 was $223,700 in April, up 1.0% from a year earlier.
Regionally, existing-home sales in the Midwest eased by 0.7% in April to a level of 1.38 million, and are 11.5% below a year ago. The median price in the Midwest was $166,600, which rose 1.9% from April 2006.
Existing-home sales in the South slipped 1.2% to an annual sales rate of 2.38 million in April, and are 8.8% below April 2006. The median price in the South was $181,100, down 0.3% from a year ago.
Existing-home sales in the West declined 1.7% in April to an annual pace of 1.19 million, and are 15.6% below a year ago. The median price in the West was $338,200, which is 2.1% lower than April 2006.
Existing-home sales in the Northeast fell 8.8% to a level of 1.04 million in April, and are 8.8% lower than April 2006. The median existing-home price in the Northeast was $283,600, which is 0.6% below a year ago.
(1)The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40% of multiple listing service data each month – and typically are not subject to large prior-month revisions.
(2)The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data.
Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
(3)Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for May will be released June 25. The next Pending Home Sales Index will be on June 1 and the forecast will be revised June 6.