US home sales see unexpected gain in April

09 June 2008 20:09  [Source: ICIS news]

WASHINGTON (ICIS news)--Sales of existing US homes produced an unexpected gain of 6.3% in April as bargain hunters began to take advantage of low prices and newly available property loans, the National Association of Realtors (NAR) said on Monday.

 

The association said the sales improvement in April was the best performance since October last year.

 

The trade group for US real estate agents said that its pending home sales index for April rose to 88.2% from the 83% reading seen in March.  The index is based on the number of sale contracts signed for existing single-family residences.

 

However, the index is 13.1 points lower than it was a year ago when the April 2007 level was at 101.5%, the group said.

 

While the rate of existing home sale contracts remains well below a year ago, April's figures are seen as a hopeful indicator, especially as they come on the heels of a US Commerce Department report of improved new home sales in April.

 

The US home construction and real estate market constitute an important downstream consuming sector for the chemicals industry. 

 

Although new home construction represents the highest volume of consumption of plastics, coatings, adhesives and other chemicals or chemical-derived products, existing home sales also generate chemicals consumption when residences are improved for sale and are redecorated by new owners.

 

Improvements in the existing homes market also are closely watched by chemicals producers as a harbinger of improvements in the new home construction sector.

 

The real estate agents’ association said that the gain in April’s sales contracts suggests that “a modest gain in the level of home sales is possible over the next couple of months, and an improvement is forecast for the second half of this year”.

 

The association said that an increasing number of home buyers are taking advantage of low real estate prices and the availability of new and low-cost mortgage loans.

 

NAR chief economist Lawrence Yun said that pending sales contracts have picked up notably in areas undergoing significant price drops.  “Bargain-hunters have entered the market en masse, especially in areas that have experienced double-digit price declines,” Yun said.

 

NAR president Richard Gaylord said the US home market may be “breaking its holding pattern” and perhaps is pulling out of the market nose dive that began in late 2006.

 

“It appears that more buyers are realizing they can take advantage of a favourable combination of mortgage interest rates, home prices and family income,” Gaylord said.

 

Yun said that existing home sales should increase from an annual pace of 5m units in the second quarter this year to more than 5.8m units on an annual basis in the fourth quarter.

 

“The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely,” Yun said.

 

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By: Joe Kamalick
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