Existing home sales rose 2.9% m/m to 4.68mn saar in April, in line with expectations. This partially offsets the 3.4% drop in March, keeping existing home sales roughly stable since the end of last year. Sales increased 3.5% m/m in the West, which translated to a 19% y/y rise. The large presence of foreclosures in parts of the West, particularly in California, Nevada, and Arizona, has enticed bargain hunters and boosted sales. Sales also gained 11.5% m/m in the Northeast and 1.8% in the South but declined 2.0% in the Midwest. In all three of these Census divisions, home sales are down about 10% y/y. The apparent leveling off in national existing home sales owes to deep discounting and lower mortgage rates, which have lured first-time buyers into the housing market. Indeed, according to the National Association of Realtors, first-time buyers make up about 40% of total transactions.

Inventory of homes for sale jumped 8.8% m/m in April, leaving 10.2 months of supply on the market. Part of the gain in inventory is seasonal as homes are put on the market for the spring selling season. However, even after seasonally adjusting the data, inventory increased 5% m/m, the first monthly gain since September. This exerts downward pressure on home prices, leaving median prices down 15.4% y/y in April.

FHFA US home prices edged lower in Q1, but by considerably less than Case-Shiller prices

The Federal Housing Finance Agency (FHFA) purchase-only home price index declined 1.1% m/m in March, reversing the gain over the prior two months. In addition, the data were revised to show a smaller increase of 0.2% in February versus the previously reported 0.7% gain. This left home prices down 11% from the peak, which is still considerably below other measures of home prices (Case-Shiller (-31%), Radar Logic (-33%), National Association of Realtors (-21%), Zillow.com (-22%)).

The quarterly data were also released with the March report. The purchase-only index slipped 2.2% q/q saar or 7.1% y/y. The all-transactions index, which includes appraisals from refinancing, rose 1.7% q/q saar, leaving prices only down 3.3% y/y. We discount the all-transactions index since it is heavily skewed by refinancing (93% of Q1 data). The purchase-only state data showed that four states (Alaska, Oklahoma, South Dakota, and North Dakota) experienced a y/y increase in home prices. The steepest declines were in Nevada, Florida, California, and Arizona, respectively. The FHFA also introduced home price indexes for the 25 biggest metro areas to make a comparison to Case-Shiller and Radar Logic. The biggest decline of 38% y/y was in the Miami metro area, while the healthiest market was Dallas, where prices were little changed over the year.

The FHFA home price data have shown the smallest decline in home prices of all the measures we follow. This is likely because FHFA only tracks homes with agency mortgages. Regardless of the measure, we believe that home prices have further to fall as foreclosures flood the market and rising unemployment stems housing demand. The pace of decline of home prices should start to slow, but we do not see a bottom until H2 2010.