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More green shoots in housing market

May 23, 2012|By Don Lee
  • Homes on the market in Winter Garden, Fla.
Homes on the market in Winter Garden, Fla. (John Raoux / Associated…)

WASHINGTON -- More green shoots are appearing in the nation's long-dormant housing market.

Sales of new homes rose 3.3% in April from March to a seasonally adjusted annual pace of 343,000, the Commerce Department reported Wednesday. That was slightly stronger than what most analysts had forecast, and the latest in a string of recent reports suggesting that a housing recovery is taking hold.

On Tuesday, the National Assn. of Realtors said existing home sales increased 3.4% in April from the prior month. And earlier it was reported that new housing starts advanced last month to an annualized rate of 717,000 homes -- the highest level since 2008.

The April sales were almost 10% higher than a year earlier. And the median price, or the midpoint, of new homes sold last month was $230,000 -- up 4.9% from April 2011.

That said, the recent pickup is modest and coming from a very low base. The April pace of new-home sales was still just a fraction of last decade's peak of more than 2 million homes sold in a year, and only about half the average for the last half-century. And uncertainties remain high because of the large number of homes in the foreclosure pipeline.

Nonetheless, Wednesday's report adds to the body of evidence that the housing market is finally starting its slow move up from the bottom, thanks to improving job growth and consumer confidence in recent months.   

New-home sales in April were up in three of the four regions defined by the Commerce Department, led by the Midwest and West. The South saw a decline. Nationwide, the number of new homes listed for sale at the end of April was 146,000 -- a supply that would be depleted in 5.1 months at the current rate of sales.

"Constraints on demand due to tight mortgage credit will at least not worsen, and housing affordability is high," said Celia Chen, a housing analyst for Moody's Analytics. "Sales of new homes will start digging out of their deep hole in earnest by the second half of this year."

Despite the risks to housing in areas such as California, where there is a lot of foreclosed properties, she added, there's this silver lining: "Homeowners will forgo distressed homes that tend to be in disrepair in favor of newly built homes."

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