View: Sales of existing homes climb 3%; prices spike - Economic Report -...

By Steve Goldstein, MarketWatch

WASHINGTON (MarketWatch) — Sales of existing homes rose 3.4% in April and distressed activity tapered off as the slow housing market recovery took further root.

The National Association of Realtors said Tuesday that sales rose to a seasonally adjusted annualized rate of 4.62 million, from a downwardly revised 4.47 million in March. The NAR initially reported March sales at 4.48 million.

Economists polled by MarketWatch expected a 4.6 million annual rate.

All four regions saw improvement, and compared to April 2011, sales rose 10%, the tenth straight month of year-on-year gains.

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“The level is still well below prerecession norms, but the recent pattern shows a bit of improvement,” said Michael Moran of Daiwa Capital Markets America.

From 2009 to 2011, home sales were trending around 4.41 million, but now there’s a breakout from that level, according to Lawrence Yun, chief economist of the National Association of Realtors.

A slowly improving jobs market, record-low mortgage rates and slightly better lending conditions have all contributed to the improving activity.

Median prices shot up 10.1% to $177,400 on a year-on-year basis, the biggest percentage rise since January 2006. Yun said distressed sales are tapering off, so the mix of homes is weighted more toward larger, more expensive houses.

Most other price gauges have pointed more to stabilization than such large improvements. Yun anticipates prices will climb 1% to 3% for the year.

Inventories rose 9.5% to 2.54 million, representing 6.6 months of supply. CoreLogic estimates the so-called shadow inventory, which represents homes that aren’t on multiple listing services that are either seriously delinquent, in foreclosure or real-estate-owned, to be 1.6 million units as of January.

“Although the data seem to imply that there is a relative good balance between buyers and sellers, it is unlikely that home prices can recover on a sustained basis until the number of distressed properties is more significantly reduced,” said Steven Wood, chief economist at Insight Economics.

Yun said inventories typically rise by this magnitude in April. He said April usually is the peak or near the peak of inventories for the year.

Distressed sales represented 28% of all transactions, with foreclosures making up 17% and short sales at 11%. In April 2011, distressed sales accounted for 37% of all activity. Yun expects the distressed sale percentage to shrink through the year.

The declining distressed activitry showed up in other indictators: All-cash transactions were 29% in April, down from 32% in March. Investors accounted for 22% of all transactions, down from 21% in March.

First-time buyers represented 35% of all transactions, up from 33% in March.

Steve Goldstein is MarketWatch's Washington bureau chief.