US April existing home sales fall 3.3% on higher prices

WASHINGTON (ICIS)–US sales of existing homes fell by 3.3% in April, the National Association of Realtors (NAR) said on Thursday, in part reversing the sharp 6.1% gain recorded for March, with rising housing prices blamed for the slump.

In its monthly report, the NAR said that existing homes sold in April were at a seasonally adjusted annual pace of 5.04m units, down from the upwardly revised March rate of 5.21m homes sold.

The March sales pace initially had been estimated at 5.19m units.

Despite the April downturn, NAR noted that “sales have increased year-over-year for seven consecutive months and are still 6.1% above a year ago”.

NAR chief economist Lawrence Yun attributed the April setback to a relative shortage of homes for sale, which in turn is driving real estate prices higher.

But Yun said feedback from NAR member companies indicates that would-be home buyers are showing more interest than a year ago.

“With low interest rates and job growth, more buyers will be encouraged to enter the market,” Yun said, “unless prices accelerate even higher in relation to incomes.”

The low inventory of homes available for sale soon may be remedied in part as home builders reported a sharp 20% increase in housing construction in April.

Stephen Melman, an economist at the National Association of Home Builders (NAHB), said the April decline in existing home sales was a surprise, but he too expects that sales will continue to improve in the peak US summer season and through the rest of this year.

However, Melman expressed concern that first-time home buyers made up only 30% of existing home sales in April, the same level seen in March.

“First-time buyer participation remains well below the historically typical 40% share,” he said.

The housing market needs greater buying participation by young people in their late-20s and those in their 30s if it is to see full recovery.

Those so-called “household formations” – in which young people get married, settle down and begin families – have been lagging since the 2008-2009 Great Recession, apparently because that generation remains uneasy about the economy and job security.

The nation’s housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy