April Home Sales Jump 6% after Tax Credit Boost
Raul Rodriguez sits in a Houston courtroom Monday, June 11, 2012. Rodriguez is charged with murder in a triple shooting in 2010 that left one man dead and two others injured during a dispute over the neighbor's loud party. The retired Houston-area firefighter told a police dispatcher by phone that he feared for his life and was "standing his ground." (AP Photo/Pat Sullivan) / Pat Sullivan
The National Association of Realtors said Wednesday its seasonally adjusted index of sales agreements for previously occupied homes rose 6 percent in April from a month earlier to a reading of 110.9. March's reading was revised upward to 104.6.
The rise marked the third consecutive month of increases, all of them aided by federal tax credits of up to $8,000.
But the tax credits expired on April 30. Many analysts expect sales to drop in the coming months.
"Clearly, the race to meet the tax credit deadline has left the home-buying pipeline rather empty, and we fear that still high unemployment, heavy indebtedness and tight credit will mean that it stays that way," wrote Paul Dales, U.S. economist with Capital Economics.
Evidence of a slowing market was apparent Wednesday when the Mortgage Bankers Association released a weekly report on applications to purchase homes. Applications fell for the fourth-straight week to the lowest level since April 1997.
Investors, however, seemed pleased with the April rise in pending home sales. The Dow Jones industrial average rose more than 60 points in early trading.
The Realtors index provides an early measurement of sales activity because there is usually a one- to two- month lag between a sales contract and a completed deal. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Congress included a temporary tax credit to boost home sales in the $787 billion stimulus package signed into law a month after President Barack Obama took office. The idea was to bring the housing market back to life. Lawmakers, after intense lobbying from the real estate industry, agreed last fall to extend it and expand it to more buyers.
First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500. To qualify, buyers had to have a signed sales contract by April 30 and must close the sale by the end of this month.
About 2.6 million households had used the credit as of late April at a cost of $18.7 billion, according to the Internal Revenue Service.
The biggest boost for pending sales was in the Northeast, where sales rose nearly 30 percent. Sales were up 7.5 percent in the West and about 4 percent in the Midwest. They fell 0.6 percent in the South.
Popular on MoneyWatch
- Reverse cell phone lookup service is free and simple
- Forbes names most powerful women 2013 10 Photos
- Student loan defaults rising despite a way out
- Rent the cake? Unusual tips to cut your wedding bill
- How to stop the mediocrity pandemic
- Top 10 professional life coaching myths
- How to organize your job hunt
- Making your smartphone battery last longer