• Zillow expects existing home sales to increase 0.35 percent in April from March, to 5.35 million units at a seasonally adjusted annual rate (SAAR).
• New home sales should rise 1.85 percent to 520,000 units (SAAR), reversing the 1.5 percent drop reported in March.
• Forward-looking new construction data suggest that new home sales should pick up this summer.

Low inventories continued to weigh on home sales in April although our forecasts suggest that market conditions may have eased slightly from March.

We expect existing home sales to rise 0.35 percent at a seasonally adjusted annual rate (SAAR) in April from 5.33 million units in March (figure 1). We expect new home sales to increase more, rising 1.85 percent to 520,000 units (SAAR) (figure 2). If so, it would be the first month since December that both new and existing home sales have increased compared to the previous month. Moreover we expect sales to have increased substantially compared to a year ago: our forecast suggests that April existing home sales will be 1.9 percent above April 2015, and new home sales will be up 7.3 percent.

During the first quarter of 2016, exceptionally tight for-sale inventory – both among existing and new homes – has held down sales and pushed up prices. Inventories were down 1.5 percent in March 2016 from a year earlier according to the National Association of Realtors (NAR). Inventories were much tighter for single-family homes (down 8 percent year-over-year) than for condos and co-ops (down 0.6 percent year-over-year).

New construction activity continued its gradual expansion with improving single-family permits and starts in early 2016. As of April 2016, single-family permits were up 8.4 percent from a year earlier, single-family starts were up 4.3 percent, and the number of single-family homes under construction was up 18 percent. This construction activity has yet to materialize in new home sales, which have declined each month thus far in 2016. But we expect this trend to break in April (figure 2).

In light of incoming construction and inventory data, we have revised upward our long-term forecasts, particularly for new home sales. We now expect a relatively strong increase in new home sales this summer.