Friday’s housing data suggests that the sector is improving, but still isn't there yet. Existing home sales rose in April for the first time this year, edging up 1.3 percent from the month before, and sales of new single-family homes advanced 6.4 percent from their March levels. Existing home sales are still 6.8 percent below where they were at this time last year, however, and new home sales are still 4.2 percent below last year's level.
“Today’s gains in new home sales confirm that the recovery in housing construction will continue to outpace the recovery in home sales,” Diane Swonk, chief economist at Mesirow Financial in Chicago, wrote in a blog post. “We have overshot on the downside and now have some leeway to catch up.”
Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut, noted in an email to clients that the current pace of new home sales is about half of what it was from 1999 to 2002, while existing home sales are a more robust 15 percent below their pre-housing boom pace.
“Builders have been very conservative in this recovery and continue to drag their feet in terms of providing new home supply, which represents one of the reasons that prices have risen so fast over the past two years,” he said.
The median home price for existing single-family homes increased in 74 percent of U.S. metropolitan areas in the first quarter of 2014, a report from the National Association of Realtors showed. Rising home prices means homeowners are building equity, but they’re becoming less affordable for potential buyers.
Federal Reserve officials this week voiced a variety of perspectives on the housing market, and minutes from the Federal Open Market Committee meeting showed a “number of participants” identified persistent slowing in the housing sector as a downward risk to economic growth.
“The fundamentals of the housing market remain sound, including stronger household formation, solid job growth and consumers with stronger balance sheets,” Philadelphia Fed President and Chief Executive Officer Charles Plosser said Tuesday in Washington, D.C.
That same day, New York Fed President and Chief Executive Officer William Dudley pointed to tightened lending standards, student loan debt burdens and short housing inventory as headwinds for the sector.
“Although I expect that the housing recovery will resume, the pace will likely be slow, especially relative to past economic recoveries,” he said in New York.