April sales jump, but warning signs flashing ahead

The expected rush towards the end of the tax credit period was reflected in a whopping 32% year over year increase in Cincinnati area sales, 22% on a national basis. And the hits just kept on coming:

• Sales from January to April are up 8.34% over last year
• Total dollar volume of Cincinnati MLS sales through April is up 21.98%
• The local inventory to sales rate fell to 7.52 months, the lowest April rate since 2006.
• Nationally, new home sales increased 14.8% and the inventory of new homes fell 5.8%
  
• Pending sales rose 5.3% nationally
  
• The median sales price increased to $173,100 nationally, $150.3K locally.
  

(view local April charts)

But with all the feel good news, there are telling signals that the road to a stable housing market will be bumpy. Some of the caution flags include:

• The inventory level inched back up. If pending sales drop off after April, we are likely to see the absorption rate move back higher and increase the duration that homes are on the market.
  
• Although housing starts increased, building permits, a forward looking indicator of construction activity, declined 11.5% from March.
• Foreclosures and delinquencies continued to increase. While we may be nearing a peak, this will also continue to pressure prices. (One positive - a lot of investors are snapping up properties at the low end which creates a pricing floor while clearing inventory.)

Anecdotal evidence from my own experience and comments from other agents suggests that buyers have gone back to a "I'll take my time" approach so that they can feel they are getting the absolute best bargain available. That mind set is likely to prevail until interest rates start heading higher, inventory falls, and the unemployment rate declines.