NEW YORK (Reuters) - Sales of previously owned U.S. homes rose to a five month high in April, reflecting a last minute dash to close contracts before the expiry of a homebuyer tax credit, an industry group said on Monday.
KEY POINTS: * The National Association of Realtors said sales rose 7.6 percent month-over-month to an annual rate of 5.77 million units, the highest since November, from a slightly upwardly revised 5.36 million-unit pace in March. * Analysts polled by Reuters had expected April sales to increase 5.6 percent to a 5.65 million-unit pace from the previously reported 5.35 million units in March. Sales were up 22.8 percent in the 12 months to April.
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
“It was a good increase, helped by the expiring tax credit. It’s encouraging now with respect to how people are doing financially. The trouble is that the inventory of homes for sale expanded quite a bit, so there is still an eagerness on the part of people who own homes or banks who own foreclosed houses to put them on the market as soon as demand picks up. That almost certainly will be a dampening factor on prices.
“We don’t know the cost to the federal budget of this tax credit because this number of seasonally adjusted sales corresponds to a greater number of actual sales, The question is whether that was factored into the cost of the program. If we see even stronger sales in May and June, that will drive the cost of the tax credit.”
PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW YORK
“Still experiencing the influence of the home buying tax credit, April existing home sales totaled 150,000 above expectations. However, due to a sharp inventory rise of 418,000, the months’ supply rose to the second highest reading since last summer. Bottom line, the data is old news because now the market is subject to good old-fashioned supply and demand where still-subdued prices and lower mortgage rates will face off against a still tough labor market, no tax credit and big supply.”
DAN GREENHAUS, CHIEF ECONOMIC STRATEGIST, MILLER TABAK & CO., NEW YORK, NEW YORK:
“This is arguably the most unsurprising news the market will ever get. The first-time homebuyer credit required a contract signing by the end of April and as a result, an influx of first-time home buyers drove sales well above expectations. First-time home buyers made up 49 percent of sales, up from 44 percent in March and above 40 percent levels seen in earlier months.
“Furthermore, the large spike in inventory levels is equally unsurprising. The inventory of homes rose by 11.5 percent to 4.04 million, a steep increase from recent levels and which pushed up the I/S ratio to 8.4 months. The NAR is dismissing the jump in inventory as ‘seasonal’ and while we do not disagree with them -- housing activity of all stripes jumps in the spring -- it does remind investors that the ‘shadow’ inventory is a real problem.”
CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK
“It’s the last month of the first-time homebuyer tax credit and it looks like we got a nice final pop here, up about 7.6 percent. We’ve already seen the tax credit expire once in October of last year and that was the highest level of home sales since ‘07 so it’s nice that we had another strong number but I don’t think it’s going to last.
“I wouldn’t be surprised, if sales weakened dramatically in the next month or two, if Congress does decide to extend it -- it’s been one of the more effective stimulus efforts.
“We’re still obsessed with Greece and on top of that people are well aware that this is a special month I guess because there is an exogenous factor that boosted sales so I don’t think it will have a big market impact. One thing that is important to bear in mind is like the Cash for Clunkers program even though it only temporarily boosted sales it did take a big chunk out of inventories.”
JOHN CANALLY, ECONOMIST/INVESTMENT STRATEGIST, LPL FINANCIAL, BOSTON:
“You like to see what happens after (the tax credit expiration). This particular set of data has been regarded as yesterday’s news. You are just waiting for the next shoe to drop to see how bad sales will be in May.
“The inventory of existing homes is still pretty high and this suggests there is a long way to go to work through that.”
ALAN GAYLE, SENIOR INVESTMENT STRATEGIST, RIDGEWORTH INVESTMENTS IN RICHMOND, VIRGINIA:
“The positive response from the expiring credit came through, as expected. The good news is that consumers are still responding to incentives, but the question mark is what happens now that the incentives are expired. I’m expecting a drop next month. The heavy supply overhanging the market will remain a challenge for housing.
“I don’t think the housing story is the big story right now. The market has been expecting better housing data within a weak market. We’ve had the expected uptick in a soft market, now its back to the international consideration questions. Those are going to hold sway on trading.”
TORSTEN SLOK, SENIOR ECONOMIST, DEUTSCHE BANK, NEW YORK, NEW YORK:
“The critical issue going forward it whether the housing market will be able to stand on its own legs without government support.
“With mortgage rates approaching 4.8 percent the housing market is getting a lot of support which is countering the negative pressures from foreclosures.
“The problems in Europe are helping U.S. homeowners by lowering U.S, mortgage rates.”
MARKET REACTION: STOCKS: U.S. stock indexes pared losses before falling again. BONDS: U.S. Treasury debt prices were little changed. DOLLAR: U.S. dollar added to gains against the euro.
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