Existing home sales slip 0.8%

Bloomberg takes a page out of Reuters’ style book by announcing that existing home sales dropped “unexpectedly” by 0.8% in April, but I’m not sure what’s so unexpected about it.  Sales fell in February by 9.6%, rebounded upward by less than half of that amount in March (3.7%), and April’s numbers are just a slight downtick to an annualized rate in between February’s 4.92 million and March’s 5.1 million:

Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.

Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.

Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.

“We’re near minimalist levels right now,” David Resler, chief economist at Nomura Securities International Inc. in New York, said before the report. “Housing isn’t going anywhere.”

Well … yeah.  As long as unemployment remains high, inventory remains glutted, and fuel prices remain elevated, the housing markets aren’t going to move much at all.  So why is Bloomberg caught by surprise by a mild decline?

In fact, this might not be all bad news.  The annualized sales rate still remains above the February nadir, albeit only marginally.  We didn’t see a complete rollback of gains from March, which means that sales have kept the meager momentum gained, for the most part.  Sales prices still fell, especially in year-on-year comparison by 5%, but that’s also a result of increased inventory and small demand, and the 5% decline in prices from April 2010 looks pretty reasonable, considering the markets in that period.

Many of the sales still are coming from foreclosures.  That trend peaked in March as 40% of all existing home transactions were from “distressed sales,” and it only slipped to 37% in April.  Cash transactions had also peaked in March at 35%, and dropped slightly to 31%.  That would indicate that a significant part of the demand in existing homes is coming from investors rather than dwellers; we’re seeing that in the Twin Cities, which has a smaller base of distressed properties than many other metropolitan areas.  Getting interest from investors is a good sign, but the lack of interest from direct homebuyers isn’t.

April’s report on existing homes, unlike that for new construction, indicates a treading-water interval.  The housing markets won’t bounce back until we solve the unemployment issue, but we may be finding the bottom on used housing, and that would be at least somewhat positive news.

Update: Jazz Shaw wonders where all the homebuyers have gone, and then explains.