Sales of previously owned U.S. homes unexpectedly cooled in April, the fifth drop in six months, signaling a rocky start for the housing market this quarter as the supply of available properties remains tight.
Contract closings fell 0.4% from the previous month to a 5.19 million annual rate, below all economist estimates, according to data Tuesday from the National Association of Realtors in Washington. The median sales price increased 3.6% from a year earlier to $267,300, the highest on record for the month of April.
The drop -- also the 14th-straight year-on-year sales decline -- suggests the housing market is still struggling as buyers strain to find affordable options despite lower mortgage rates and steady wage and job gains. While the supply of homes was up 1.7% from a year earlier, the overall level remains relatively low at 1.83 million.
In addition to short supplies, the association also cited limits on tax deductions as hampering purchases of higher-priced homes in some states. Even so, demand remains solid, as properties stayed on the market for an average of 24 days, down from 26 days a year ago and a record low in data going back to 2011.
Other recent data indicate mixed momentum for the sector in the second quarter. New-home construction topped estimates in April, while sentiment among builders increased to the highest in seven months in May. At the same time, permits for single-family homes, a proxy for future construction, fell in April to the lowest level since 2016, signaling continued constraints on available properties.
"The economy in April enjoyed a robust labor market, strong consumer sentiment and low mortgage rates -- and was untouched by subsequent trade tensions with China," said Matthew Speakman, an economic analyst with the real estate company Zillow. "Yet an inventory shortage persists, with a greater share of listings reporting price cuts and, in some months, sitting on the market longer, indications that the pace of existing-home sales may continue to suffer or possibly recover slowly going forward."
The market is "underperforming in relation to economic performance," association Chief Economist Lawrence Yun said at a briefing in Washington. "Inventory conditions still remain tight even though we are seeing a little more choices for consumers." He said he's confident that there will be year-over-year gains in sales in the second half of the year, and there are signs of strong demand at the lower end of the market.
Economists surveyed by Bloomberg had projected a median 5.35 million pace for sales, with estimates ranging from 5.2 million to 5.52 million.
Home purchases fell in the South and Northeast and were unchanged in the Midwest. The West was the only region to record a gain.
Still, there is the possibility that home sales could rebound in the coming months as the lower mortgage rates spur more offers for homes, said Tian Liu, chief economist at Genworth Mortgage Insurance.
At the current pace, it would take 4.2 months to sell all the homes on the market, compared with 3.8 months in March; Realtors see anything below five months of supply as a sign of a tight market.
First-time buyers made up 32% of sales, down from 33% the previous month.
"The slow turnaround is likely because lower interest rates have not been fully passed on to homebuyers who closed in April," Liu said. "Homebuyers in subsequent months should see the benefit from lower rates, which could result in bigger sales increases as the year progresses."
Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which will be reported Thursday, account for the remainder and are counted when contracts are signed.
Information for this article was contributed by Reade Pickert of Bloomberg News and by Josh Boak of The Associated Press.
Business on 05/22/2019