Home resales continue to rise

April’s sales of existing homes rose 7.6% according to the National Association of Realtors.  What’s more March sales were revised upward to an increase of 7.0%.  However, the end of April marked the end of the Federal government’s first time home buyer tax credit.

Analysis: While much of the investment world is wondering if the housing market can sustain itself sans the Fed’s first time home buyer tax credit, I feel like the housing market is recovering.  True enough, we are unlikely to see existing home sale numbers above 3-4% going forward, but there is solid evidence that housing is recovering.  I point to the fact that both consumer confidence and spending are continuing to rise, as well as the availability of credit.  Not only that, but the huge inventory overhang of houses is starting to be worked into.

My feeling about existing home sales is that we may see a dip in May because many people who wanted to buy have already bought.  But going forward the economic conditions necessary to improve the housing market are in place.  One that you may have overlooked: because of the crisis in Europe, there is a flight to investment quality.  That is, foreign investors are investing in U.S. government debt.  That drives down interest rates here at home and acts to solidify the foundations of the housing market.

Importance grade: 6; while important, existing home sales are not nearly as important as the big economic statistics of consumer confidence and spending, and the unemployment rate.  However, in the midst of the full on market correction that we have seen over the past three weeks, this data is a welcome sign of rationality and calm.

Jason