Existing home sales unexpectedly fell by 3.26% to 5.04 million units (annualized) in April. The number of units sold was considerably below the 5.23 million annualized pace expected by the market. Previous months' sales were revised up from 5.19 to 5.21 million.
This is not the report markets were hoping for as it runs counter to the positive momentum seen in other housing indicators, such as housing starts and the pending home sales index, with the latter leading existing sales by 1-2 months.
Tight inventory rather than weakening demand appears to be the main factor restraining activity in the housing sector. Acceleration in median home prices growth also supports this view, with prices for single-family homes rising at the fastest pace since October 2013. Rising home prices should entice some homeowners to put their house on the market, helping to alleviate supply bottlenecks in the coming months.
"Looking through monthly volatility, the underlying buying conditions remain favorable. Despite the recent uptick, mortgage rates are still below their year-ago levels and within 50 basis points of all-time lows. Moreover, ongoing improvements in the labor market, as well as the slew of new initiatives aimed to make homeownership more affordable, such as 3% down payment and lower costs of mortgage insurance and lower FICO score thresholds at federal agencies, will continue support demand from both new and returning home-buyers. Rapidly rising rents will also continue to tilt the scales in favor of homeownership." said TD Economics
