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Housing Market Update - May 2009

Statistics for the housing industry were mixed in April.

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new residential sales in April increased slightly to 352,000 units, up 0.3 percent over March, though 34 percent below the April 2008 level. Inventory levels dropped from a 10.6 month supply in March to a 10.1 month supply in April. January's inventory level was 12.4 months. The median sales price for new homes was up $7,500 to $209,700, while average sales price fell to $254,000.

Existing home sales increased in April. According to the National Association of Realtors, sales of existing homes increased 2.9 percent from March to 4.68 million units, a 3.5 percent year-over-year decline. Inventory rose to 3.97 million units, however, an increase of 8.8 percent from March. This translates to a 10.2 month's supply, up from a revised 9.6 in March. Last month, we reported that median prices for existing homes rose in March to $175,200, a $7,000 increase from February. This data has been revised to $169,900, still an increase, but much smaller. In April, projected median price for existing homes was $170,200.

Standard and Poor's Case-Shiller Home Price Index confirms that no real recovery in home prices has begun. According to the index, single family homes in 20 major metropolitan areas saw a year-over-year decline of 18.7 percent in March, the largest quarterly drop in the index's 21-year history.

New residential construction statistics for April were negative once again, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. Housing starts dropped 12.8 percent in April to a seasonally adjusted rate of 458,000. This is 54.2 percent below last year's rate. Building permits were down 3.3 percent from March, falling to 494,000, fewer than half the number of permits authorized in April 2008. Housing completions rose in April, to a seasonally adjusted annual rate of 874,000. This figure is 15 percent below last year's number.

Interest rates favor home buyers, however, as they are hovering at record lows. According to Freddie Mac, the average rate for a 30-year, conventional, fixed-rate mortgage was 4.81 percent in April, down from 5 percent in March and nearly 6 percent a year ago. Together with lower housing prices, this interest rate and the $8,000 tax credit for first-time home buyers should be spurring a turnaround. However, as we mentioned in the Economic Outlook story, a combination of unemployment, job loss fears and record foreclosures are putting opposite pressure on the market. These factors will continue to work against each other until sometime in the first half of next year.