At first glance, Wednesday’s report that sales of existing homes gained by just 0.6% in April, after adjusting for seasonal factors, seems unremarkable.
But the modest gain understates what was a relatively solid report. Sales were up by 9.7% from one year ago to an annual rate of 4.97 million, which was the highest level since November 2009, according to the National Association of Realtors. (To be sure, home sales have stayed within a narrow band between 4.9 million and 4.97 million units for the last six months).
Here are four reasons why Wednesday’s report is a sign of progress for housing:
1. Sales have increased from their year-earlier levels even though there are significantly fewer homes for sale. The 2.16 million homes for sale in April was 13.6% below last year’s level. So far, significant price gains over the past year haven’t slowed sales, partly because low interest rates have allowed buyers to swallow higher prices without seeing much gain, if any, in their monthly payment.
2. Sales of non-distressed homes are picking up. Around 18% of sales in April were a foreclosure or a short sale, down from 28% one year ago. Big drops in the availability of foreclosures and other short sales haven’t yet produced declines in reported sales volumes, which means home buyers are increasing their purchases of non-distressed homes.
In California, home sales fell by 4% in April from one year earlier, according to real-estate data firm PropertyRadar, but this headline masks big changes. Distressed-property sales fell by 39.4% from a year earlier, while sales of non-distressed homes rose by 36.6%. When or whether the non-distressed component can offset the decline in the distressed component will be an important milestone in a housing recovery.
3. The number of homes for sale jumped by 11.9% in April from March. Much of this is seasonal—more people tend to list their homes for sale in April. After taking into account these seasonal factors, inventories were up by 1.8%, according to Jed Kolko, chief economist at Trulia TRLA +6.35%. While inventories are up 22% so far this year, they’re up by 4% after seasonal adjustments, according to Mr. Kolko.
Many real-estate agents have said that sales volume has been limited by the lack of supply. By the same token, the fact that demand has outstripped supply also goes a long way to explain why prices are rising by around 10% from their year-earlier levels. Rising inventory should ultimately slow some of the price rally while boosting sales volumes, helping to restore equilibrium in the housing market.
4. Homes are selling faster. Half of all homes that sold in April were on the market for 46 days, down from 62 days in March and 83 days one year ago, according to the National Association of Realtors. A separate analysis of 22 markets by Redfin, the tech-powered real estate brokerage, showed that 20% of homes went under contract in just one week in April, and one third of all homes were under contract in two weeks. The share of homes that went under contract in two weeks increased by 39% from one year ago.
Follow Nick @NickTimiraos, Wall Street Journal