Adding to the mixed results on the US real estate market, the National Association of Realtors said existing home moved sharply higher in April. But, the numbers were almost certainly an aberration.
“Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009.”
The statistics come just a week after an analysis of the Administration’s home mortgage modification program was shown to have produced less than 300,000 permanently changed home loans since its inception. Nearly 1.5 million loans are in the system for temporary modification, but the conversion rate has been extremely low due to the bureaucracy of the approval system and the reluctance of mortgage holders to take loans out of default because of the fees that they produce.
Banks have rejected suggestions from the Administration that loan principals be modified. The alterations would almost certainly cause write-offs that would hit bank earnings. Many troubled community and mid-tier banks are already considered “troubled” by the FDIC.
The reasons for the improvement in April are also because of the end-of-the-month expiration of the federal government’s home buyer tax credit. New home buyers received tax credits of $8,000. Current homeowners could quality for a $6,500 benefit.
Potential buyers are still concerned that home prices may fall further, which could leave new owners underwater along with holders of 11 million mortgages around the country. That is probably why sub-5% 30 year fixed loans are not drawing a flood of applications.
The April number is an outlier.
Douglas A. McIntyre
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