REAL ESTATE NEWS

• May 22, 2014, 12:43 p.m. ET

Existing Home Sales Rise for First Time This Year

By Jonathan House 

WASHINGTON--A broad measure of U.S. home sales rose in April for the first time this year, a sign the housing recovery regained momentum during the crucial spring selling season.

Sales of existing homes rose 1.3% in April to a seasonally adjusted annual rate of 4.65 million, the National Association of Realtors said Thursday. That was slightly lower than a 4.68 million rate forecast by economists surveyed by The Wall Street Journal and was 6.8% lower their year-ago level.

The uptick followed a rise in the trade group's March tally of pending home sales, which typically precede existing home sales by one or two months and signaled a rebound for the sector after a harsh winter. The coming months are crucial for the U.S. housing market because families traditionally prefer to move to a home in a new school district by the end of the summer.

"We think the recent slump in home sales may now be in the past," said Daniel Silver, economist at J.P. Morgan Chase.

Sales of existing homes, which account for roughly 90% of transactions in the U.S., surged in 2012 and in the first half of 2013, helping to spur investment in home building and drive the broader economic recovery. But sales started to weaken last summer as rising prices and mortgage rates pinched affordability. Unusually cold and stormy winter weather depressed sales further.

Housing investment--including expenditures on home construction, improvement and brokers' commissions--fell in the fourth quarter of 2013 for the first time in over three years and declined again in the first quarter of 2014.

Economists expect the housing industry to strengthen this quarter as improving weather releases pent-up demand. But they are unsure about the strength of its underlying momentum.

The Commerce Department will release its tally of new home sales in April on Friday.

Federal Reserve officials have expressed concern over recent weakness in housing. Minutes of their April 29-30 meeting published Wednesday showed that their outlook for a gradually improving economy hadn't changed, but that some officials had "pointed to possible sources of downside risk to growth, including a persistent slowdown in the housing sector."

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The existing-home-sales report showed that home-price gains moderated in April while the supply of homes for sale increased, both factors that could help sustain demand for housing in the months ahead. Nationally, home prices were up 5.2% to a median of $201,700 in April, the slowest annual price gain since March 2012. The inventory of homes available for sale rose to 5.9 months of supply from five months in March.

National Association of Realtors economist Lawrence Yun said he considers a six- to seven-month supply to be a "normal" level. "We are getting close to balanced market conditions," he said.

New building should also help to ease supply shortages. Data released last week by the Commerce Department showed that U.S. home construction in April surged to its highest level since November.

Data released Thursday by Freddie Mac showed mortgage rates hitting new lows for this year. The 30-year fixed-rate mortgage averaged 4.14% for the week ended Thursday, compared with 4.2% a week earlier, though it remained well above its 3.59% level from a year ago.

But a survey of its members done this month by the National Association of Home Builders showed builders' confidence falling to its lowest level in a year, which could be a bad sign for future construction. And April sales of existing homes were largely driven by the volatile multi-family segment. Single-family sales, which make up the bulk of the market, rose by just 0.5%.

"Housing activity remains tepid with the vast majority of sales in the multi-family unit space," said Lindsey Piegza, economist at Sterne Agee.