Home Sales: Just Enough to Keep Housing Recovery Hopes Alive?

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The housing market continues to show minor signs of improvement. After reaching their worst level in more than two years, pending home sales in the United States posted their second consecutive monthly gain in April. However, the results were weaker than expected.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from an upwardly revised 97.4 in March, according to the latest report from the National Association of Realtors. On average, economists expected sales to gain about 2 percent. Furthermore, sales are still 9.2 percent below the April 2013 level of 107.7. In February, pending home sales declined to their lowest reading since October 2011.

Many analysts are expecting the uptrend in home sales to continue, albeit very cautiously. “Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” said Lawrence Yun, the National Association of Realtors’ chief economist, in a press release. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”

Affordability issues are still hindering many homebuyers, as sales were mixed across the country and below year-earlier levels. The Pending Home Sales Index increased 0.6 percent in the Northeast to 79.3 in April but is 12 percent below a year earlier. The Midwest index also rose 5 percent to 99.2 percent and is almost 7 percent below year-ago levels. Meanwhile, sales in the South and West dropped 0.6 percent and 2.9 percent, respectively.

The National Association of Realtors expects total existing-home sales this year to total around 4.9 million units, which is slightly below the nearly 5.1 million recorded last year. They are expected to reach almost 5.3 million in 2015. Housing starts are projected to rise almost 19 percent in 2014 and reach about 1.1 million, closer to the underlying demand of 1.5 million. Meanwhile, the national median existing-home price is expected to rise at a more reasonable range of 5 to 6 percent in 2014 and grow another 4 to 5 percent in 2015.

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