Existing-home sales rise in March

But the larger question is what happens after the big first-time and move-up homebuyer credits expire.

By Charley Blaine Apr 22, 2010 7:56PM

Market DispatchesExisting-home sales actually grew in March from February. But the big question is what will happen next.

 

The National Association of Realtors said existing-home sales rose 6.8% to a seasonally adjusted 5.35 million units in March.

 

A big part of the gain was the government's homebuyer tax credit. Sales were up 16.1% from March 2009. But homebuilding shares rallied on the news. The Philadelphia Housing Sector Index ($HGX) jumped 3.% to 127. The index is up 13% this month and 24% this year.

 

Economists were looking for an increase of 5.2% to an annual rate of 5.28 million homes.

 

The homebuyer tax credits required that buyers get firm offers accepted by the end of the month. The deals must close by the end of June.

 

For a first-time homebuyer, the tax credit is $8,000. A move-up homebuyer can qualify for a $6,500 credit.

 

Given the nation's high unemployment rate (9.7% in March), the question is whether homebuying would fall off precipitously as did auto buying after the Cash for Clunkers program last year. Pulte Homes

 

But the drop-off in auto sales was short-lived, and sales have been stronger so far in 2010 than a year ago.

 

That's one reason why homebuilding shares moved higher today.

 

Lennar (LEN) jumped 6.6% to $19.74 on the report. Ryland (RYL) added 4.2% to $24.64. Pulte Homes (PHM) rose 6% to $12.48, and Hovnanian (HOV) was up 4% to $6.57. 

 

Another cause may be reports that some builders are starting to raise prices. Jon Lansner and Jeff Collins noted the increases this week in The Orange County Register in California. 

 

Mind you, the median price of a new home in Orange County in March was off 45.5% from the 2005 peak.

 

Elizabeth Strott contributed to this report.

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