Ahead of the Bell: US Home Sales

US home sales like edged upward in April

Associated Press

WASHINGTON (AP) -- The National Association of Realtors reports on April sales of existing homes Thursday at 10 a.m. Eastern.

SLIGHT UPTICK: Economists expect that sales rose 0.6 percent to a seasonally adjusted annual rate of 5.22 million homes, according to a survey by data firm FactSet. It would be the second straight month of the annual sales rate topping 5 million homes, a sign of the pent-up demand from this past winter when frigid weather and snowstorms caused many buyers to wait on the sidelines.

The increase reflects the combination of strong job growth over the past year and low mortgage rates.

WHERE ARE THE SELLERS?: But greater buyer demand in recent months has failed to entice more people to list their properties for sale. The aftermath of the 2008 financial crisis and the housing bust continues to haunt the real estate market even as the economic recovery approaches its seventh year. Millions of homeowners still owe more on their mortgages than their homes are worth — and they're unwilling to sell at a steep loss.

Nearly 17 percent of mortgage holders were underwater at the end of 2014, according to the real estate firm Zillow.

The shortage of supply should help cause prices to rise to a level that fixes this problem. But too swift an increase also poses a destabilizing risk for the market. If home values rise too quickly, economists warn that more buyers will be priced out of the market and demand will fall, hurting demand and sales.

As of March, the market had only 4.6 months of supply, compared to six months in what economists consider to be a healthy market. The limited supplies have caused prices to rise at a level that hurts affordability. Median home prices increased 7.8 percent over the past 12 months to $212,100, an increase nearly four times greater than average wage growth.

One way to address the shortage would be to build more homes. The government reported this week that homebuilders upped the pace of construction in April to the fastest level since November 2007, but developers say that the process of planning new developments that could provide a greater inventory of homes can take at least a year.

Strong hiring and low mortgage rates have helped fuel the buying.

Over the past 12 months, employers have added 3.1 million workers, each of them with a new paycheck to be spent. The additional income has led to many economists to forecast an increase in home sales this year.

Mortgage rates remain below historical average, despite increases in recent weeks.

Average 30-year fixed rates were 3.85 percent last week, according to the mortgage giant Freddie Mac. That average has dropped from a 52-week high of 4.23 percent.

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