Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.9 percent to a seasonally adjusted annual rate of 4.68 million units in April. Sales have now been level since November 2008 as the selling season kicks into high gear, with the National Association of Realtors reporting greater prospective buyer traffic and a higher percentage of repeat buyers.

But we will not see any great reduction in inventories or stabilization of housing prices until the jumbo loan so-called toxic assets are removed from banks’ books, which could take some time. This is because their value cannot be determined until foreclosure rates stabilize, which gives investors a concrete default rate for those loans.

But their value has already appreciated as the likelihood that many will default declines with falling interest rates. The MTA index used on many ARMs, for example, has plunged to 1.21 percent, so with the 2-2.5 percent margins prevalent at the time, their current rates are 3.21-3.71 percent, far below prevailing rates. The other prevalent 1-year LIBOR ARM index is now just 1.58 percent.

The TALF program to purchase jumbo mortgage-backed securities should kick into gear in 4 to 6 weeks, according to Treasury Secretary Timothy Geithner–. It has been delayed in part because banks are reluctant to sell their jumbo loans—mostly Alt-A and Option ARMs that do not yet have an agreed upon value because of the still high foreclosure rate.

“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” said NAR chief economist Lawrence Yun. “Fortunately, home buyers are being attracted to deeply discounted prices and are bidding up many foreclosed listings, particularly in California, Nevada, and Florida – this will set the stage for healthy market conditions going forward.”

First-time buyers continue to influence the market but there also is a seasonal rise of repeat buyers, said Yun. “Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the mid price ranges, but high-end home sales remain sluggish,” he said. “The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program.”

Another sign of a firming real estate market is that the NAR’s Pending Home Sales Index, a leading indicator of future sales, also rose in April to the highest level since September 2008, up 6.7 percent after a 3.2 percent increase in March. The index is also 3.2 percent above April 2008.

First-time buyers declined to 40 percent of transactions, implying more repeat buyers are entering the traditional spring home-buying season. It also showed the number of buyers looking at homes has increased 14 percentage points from a year ago. “This is consistent with our forecast for home sales in the latter part of the year to be 10 to 20 percent higher than the second half of 2008,” Yun said.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.81 percent in April from 5.00 percent in March; the rate was 5.92 percent in April 2008.

Total housing inventory at the end of April rose 8.8 percent to 3.97 million existing homes available for sale, which represents a 10.2.-month supply at the current sales pace, compared with a 9.6-month supply in March. “The gain in inventory is largely seasonal from sellers entering the spring market. Even with the rise, inventory over the past few months has remained consistently lower in comparison with a year earlier,” Yun noted.

clip_image002

Existing condominium and co-op units led April sales, increasing 6.4 percent to a seasonally adjusted annual rate of 500,000 units from 470,000 in March, but are 9.4 percent lower than the 552,000-unit pace a year ago. The median existing condo price was $173,900 in April, down 18.5 percent from April 2008.

Single-family home sales rose 2.5 percent to a seasonally adjusted annual rate of 4.18 million in April from a level of 4.08 million in March, but are 2.8 percent below the 4.30 million-unit pace in March 2008. The median existing single-family home price was $169,800 in April, which is 14.9 percent below a year ago.

clip_image004

Regionally, the Northeast led sales with a 11.6 percent jump, with the West and South showing smaller increases. Only the Midwest showed a slight decrease.

Harlan Green © 2009