After a disappointing first quarter, home sales are primed for pick up due to lower mortgage rates and slowing price appreciation, according to Scott Anderson, chief economist at the Bank of the West.
The National Association of Realtors pending home sales index rose 3.4% in March, "foreshadowing stronger home sales in April," the chief economist said in his weekly U.S. Outlook report.
He also noted that the Mortgage Bankers Association's purchase mortgage application index bottomed out in March and it has been "gradually rising ever since."
Next week, the Realtors will release their April existing home sales report for April and the Census Bureau will release its new home sales report for April. "We are forecasting improvements on both new and existing home sales," Anderson says in the May 16 report.
The former Wells Fargo economist is forecasting a 2.5% increase in existing home sales for April from the prior month and a 12.5% jump in new home sales.
"So while housing has had some trouble adjusting to the rate and price shock that occurred last year, we expect the combination of a stronger economy, pent-up housing demand and low interest rates to rekindle some positive momentum to the housing market in the months ahead," Anderson said.
Bank of the West is based in San Francisco.
Separately, the Realtors blame "severe weather patterns" for the slowdown in existing home sales during the first quarter. NAR chief economist Lawrence Yun expects an "uptrend" in sales over the balance of the year. However, sales will likely fall short of 2013's total.
"Even with the gradual improvement moving forward," Yun said, existing home sales are projected to decline about 3% in 2014 to 4.9 million from 5.1 million last year.