The National Association of Realtors reported on Wednesday that existing home sales were up 0.6 percent in April from an annualized rate of 4.94 million units to 4.97 million units (including all single-family, condos and co-op residences). Compared to April 2012, when the annualized rate was 4.53 million units, sales activity is up 9.7 percent.
Total U.S. housing inventory at the end of April rose 11.9 percent because of a seasonal increase to 2.16 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace. That compares with 4.7 months in March. A more revealing comparison—because inventories always go up in the spring—is that listed inventory is 13.6 percent below a year ago, when there was a 6.6-month supply. It’s particularly hard to find lower-priced houses.
Distressed homes–foreclosures and short sales–accounted for 18 percent of April sales, down from 21 percent in March and 28 percent in April 2012, according to NAR. 11 percent of April sales were foreclosures, while 7 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in April; short sales were discounted 14 percent.
FOMC mulls QE3 wind down, promises nothing
The Federal Open Market Committee of the Federal Reserve released the minutes of its April 30-May 1 meeting on Wednesday, and among other things, the committee gnawed on the subject of “exit strategy.” An exit, that is, from the central bank’s fiscal stimulation popularly known as QE3.
The committee noted in the minutes that “the participants’ discussion touched on various aspects of the exit strategy principles… including the size and composition of the [System Open Market Account] portfolio in the longer run, the use of a range of reserve-draining tools, the approach to sales of securities [and] the eventual framework for policy implementation.” How best, in other words, to get out of the thicket of asset purchases that the Fed has undertaken without disruption to the economy.
The following sentence received a lot of coverage: “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome.”
But the FOMC also explained that it isn’t exactly in a hurry to wind down QE3: “Because normalization still appeared to be well in the future, the Committee might wish to wait and acquire additional experience to inform its plans,” the minutes pointed out. That’s the Fed telling policymakers and investors and employers and others not to hold their breath waiting for the end of the stimulus.
Bernanke takes Congress to task over austerity
Also on Wednesday, Fed chairman Ben Bernanke was before the Congress’ Joint Economic Committee scolding the federal legislative branch for its parsimonious reaction to the recession and its aftermath. “Most recently, the strengthening economy has improved the budgetary outlooks of most state and local governments, leading them to reduce their pace of fiscal tightening,” the chairman said.
“At the same time, though, fiscal policy at the federal level has become significantly more restrictive,” he continued. Sequestration, along with the rise in the payroll tax, will “exert a substantial drag on the economy this year,” Bernanke warned.
Wall Street took a dive in the afternoon after word of the chairman’s outlook for the economy broke. The Dow Jones Industrial Average lost 80.41 points, or 0.52 percent, while the S&P 500 was off 0.83 percent and the Nasdaq declined 1.11 percent.