Zacks_Analysts' Blog : Existing Home Sales Up in April - Analyst Blog

The existing home sales in the U.S. rose in April, marking the second consecutive month of improvement in previously owned homes. Total purchases of existing houses stood at a seasonally-adjusted annual rate of 5.2 million, up 2% from a seasonally-adjusted annual rate of 5.1 million a month ago.

High unemployment, low customer confidence and tough credit rules have acted as driving forces behind this increased sale of pre-occupied homes in the current year. Consequently, construction of new homes was largely affected.

In the first four months of the year, total permits issued for new homes totaled at a seasonally adjusted 126,400 units, down 22.2% year over year; new home starts totaled 125,500 units (seasonally adjusted), down 24.7% year over year; and total new homes completed during the period was 122,000 units (again seasonally adjusted), down 13.6% from last year.

The country’s major homebuilders including D.R. Horton (DHI),  PulteGroup (PHM), Meritage Homes Corporation (MTH), Toll Brothers (TOL) and Lennar Corp. (LEN) were affected by poor new home sales during the last few quarters. Each of these homebuilders performed poorly, vis-a-vis expectations, in the recent quarters, citing a weak  economy and adverse factors influencing the housing industry.

According to some industry experts, the recent trend in the housing industry is not expected to see any major change during the forthcoming months. Thus, new home sales are expected to remain depressed, in turn forcing home prices to fall and home inventories to rise.

However, some views this as a good sign for the economy, reflecting a fast clearance of the huge amount of foreclosures already existing in the market.