Housing: The New Growth Market

Things are shaping up nicely as we head into summer.

Sales of existing homes once again ratcheted a notch higher. For April, sales rose 1.7% to 5.45 million units on an annualized rate.  The sales trend shows that monthly sales are occurring at the highs that were posted last fall.

We’re seeing more sales, but we’re not seeing more discounting.  To the contrary, the median price of an existing home rose 5% to $232,500 for April.  Year over year, the median price is up 6.3%. The fact that we are seeing more sales while prices hold firm bodes well for sales as we head into summer.

That we also see more existing homes coming to market also points to strong summer sales. Existing-home inventory was up a stout 9.2% for April, lifting the total number of homes for sale to 2.14 million. But even with this increase, inventory still runs low. The number of existing homes for sale in April were 3.6% lower than the number that prevailed a year ago. All in all, though, the April report on existing-home sales was a very encouraging report.

The same can be said for the report on new-home sales. The report was very encouraging. Indeed, it was even more than very encouraging. Our initial response was “WOW.”

April new-home sales posted at 619,000 units on an annualized rate. That’s a 16.6% monthly increase – the highest monthly increase in 24 years.  April’s numbers blew out all other monthly numbers since the housing recovery took hold a few years ago.  What’s more, the April report showed a 39,000 net upward revision in sales in the previous two months.

The trend in pricing makes the surge in new-home sales all the more startling.  Builders had been discounting to move inventory in recent months. That certainly wasn’t the case in April: The median price of a new home soared 7.8% to a record high of $321,000.

On the lending side, we find that the trend in mortgage applications also portends better days ahead.

Purchase applications moved higher last week, increasing 5% from the prior week. Purchase- application activity is running 17% higher than it was a year ago. This is an impressive gain that points to a strengthening housing market.

This latest round of housing and lending data support a contention that we’ve had all along.  Entering January, we predicted that 2016 could be the strongest year for home sales and lending that we’ve seen in over decade.  Our prediction is looking more likely to come to fruition.

Information provided by Jessica Regan.

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