During the previous three months, the pace of home sales accelerated and NAR Chief Economist Lawrence Yun said a one-month setback in light of many months of gains does not change the fundamentally improving housing market conditions.
“Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues,” he said.
Home sales are staying well above the levels seen from 2008 through 2011. “Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007,” he said. “All of the major housing market indicators are expected to trend gradually up, but a new federal budget must be passed before the end of the year for the economy to continue to move forward.”
Regional home sales
- The PHSI in the Northeast rose 0.9% in April and is 19.9% higher than April 2011.
- In the Midwest, the index slipped 0.3% but is 23.0% above a year ago.
- Pending home sales in the South fell 6.8% in April but are 13.3% higher than April 2011.
- In the West, the index dropped 12.0% in April but is 5.1% above a year ago.
NAR is predicting 4.66 million homes will change hands this year, up from 4.26 million in 2011. The outlook for 2013 is now 4.92 million, but could vary significantly depending on two scenarios.
If lending returns to normal, the 2013 outlook for existing-home sales would measurably improve to 5.3 million. However, a fiscal-cliff scenario of higher federal taxes and sharp spending cuts beginning in early 2013, which is an unlikely event but still worth noting, would lower the sales projection to 4.5 million, Yun said.
Home prices could rise
As the supply of homes for sale shrinks, prices will rise 2 to 3% this year and 4 to 5% in 2013, Yun predicted. There will be wide variations in local markets, with Miami and Phoenix easily achieving double-digit price growth by year end, he added.
Those price gains will measurably reduce the number of underwater home owners. “For example, a 5% national price gain means the number of underwater home owners would fall to about 9 million from current estimates of around 11 million,” Yun said. “A 10% gain, say over the next two years, would reduce the underwater status to about 7 million households out of 75 million owner-occupied homes.”
About 25 million homes are owned free and clear without a mortgage.
Though the proportion of distressed properties is still high, the numbers have been falling over the past two years. “The diminishing share of distressed properties is another reason for higher home prices in upcoming months,” Yun added.
Source: National Association of Realtors