More people probably bought previously occupied homes in April than in March. But the increase in sales was likely driven by investors, and not first-time homebuyers who are needed to help the housing market recovery.
Economists expect that the April sales pace rose nearly 2 percent from the previous month to a seasonally adjusted annual rate of 5.2 million units, according to a survey by FactSet. The National Association of Realtors will release the report at 10 a.m. Eastern on Thursday.
Sales rose 3.7 percent in March to a seasonally adjusted annual rate of 5.1 million. That's still far below the 6 million homes a year that economists say represents a healthy market.
And investors are the ones lifting home sales. They are spending cash to grab deeply discounted homes at risk of foreclosure. Foreclosures and short sales _ when a lender agrees to accept less than what is owed on a mortgage _ now make up 40 percent of all home sales.
By contrast, purchases by first-time homebuyers are falling. They are critical to a housing recovery. They typically improve their properties and invest in their communities, a combination that helps home values rise. But in March, just 33 percent of purchases were by first-time buyers compared to a healthier makeup of about 40 percent.
Annual sales hit an all-time high of nearly 7.1 million homes in 2005. Since then, sales have fallen in four of the past five years. Last year the fewest people bought previously occupied homes since 1997. Sales are falling even as prices decline. The median sales price in March was $159,600, down nearly 6 percent from a year ago.
Foreclosures are playing a big role in weakening the housing industry. A record 1 million homes were lost to foreclosures last year and foreclosure tracker RealtyTrac Inc. said it expects 1.2 million more will be lost this year. Homes at risk of foreclosures usually sell at 20 percent discounts compared to their original listing price. So when sales of distressed properties rise, prices fall.
There's also a glut of unsold homes on the market. In March the supply of homes rose to 3.55 million. At last month's sales pace, it would take 8.4 months to clear those homes. Analysts say a healthy supply can be cleared in six months.
The situation is much worse when taking into account the "shadow inventory" of homes, economists say. These are homes that are in the early stages of the foreclosure process but, because of backlogged courts or state and federal probes, have been not been put on the market for resale.
Many would-be buyers are simply holding off, worried that home prices won't hit bottom for some time. Others who normally would buy are having trouble getting mortgages because banks are tightening their lending standards.