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U.S. Housing Continues Downward Drift
May 19 The U.S. housing market, unable to establish a sustained upward trend, drifted lower in the past month, according to a number of recent reports.
Existing home sales slipped 0.8% in April, from a downwardly revised rate of 5.09 million in March, reported the National Association of Realtors (NAR). April sales were 12.9% off the pace of spring 2010, when the market brightened in response to federal home buyer tax credits.
Lawrence Yun, NAR chief economist, said the market is underperforming. "Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger," he said.
"Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations," explained Yun.
The national average mortgage rate for a 30-year mortgage was 4.84% in April, unchanged from March and down from 5.10% in April 2010, according to Freddie Mac.
Despite good affordability, a separate survey showed that 11% of NAR realtors reported at least one contract cancelled in April because an appraisal came in below the negotiated price. Additionally, 10% reported contracts delayed.
"Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards," Yun added.
The most recent home price data from the S&P/Case-Shiller Home Price Indices, released in late-April, showed prices in the 10-city and 20-city composite indices lower than a year previously, and just slightly above their April 2009 bottom. Both indices have returned to their summer 2003 levels.
"There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing." said David M. Blitzer, chairman of the Index Committee at S&P Indices.
"Ten of the 11 MSAs that recorded index lows in January fell further in February. The 20-City Composite is within a hair's breadth of a double dip. Fourteen MSAs and both Composites have continued to decline month-over-month for more than six consecutive months as of February," he explained.
Housing starts and building permits issued also declined in April, the U.S. Census Bureau reported. Starts were off 10.6% below March and 12.8% below April 2010.
Building permits issued fell 4% in April versus March and were 12.8% below the year-earlier level.
Builder confidence in the market for newly-built, single-family homes remained unchanged in May, but at the low level of 16, according to the National Association of Home Builders/Wells Fargo Market Index (HMI). The Index has remained at the same level for six of the last seven months, the report states.
"Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook," said NAHB Chairman Bob Nielsen, a Reno, NV, home builder. In addition, he cited high gas prices as a further brake on the market.