Home resales inch up in April

NEW YORK (CNNMoney.com) -- The residential real estate market picked up slightly in April, as increasingly affordable home prices drew in hesitant buyers.

The National Association of Realtors reported that existing home sales ticked up 2.9% last month to a seasonally adjusted annual rate of 4.68 million units compared to the revised rate of 4.55 million in March.

The sales came in slightly ahead of expert forecasts of 4.66 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, but are still off 3.5% from the 4.85 sold 12 months ago.

First-time homebuyers continued to drive sales, according to Lawrence Yun, NAR's chief economist, but there was also a seasonal rise of repeat buyers.

"Most of the sales are taking place in lower price ranges and activity is beginning to pickup in the mid-price ranges, but high-end home sales remain sluggish," he said.

The median price of homes sold in April was just $170,200, a 15.4% year-over-year drop.

The slight sales increase failed to make a dent in the supply of homes on the market: Inventory rose to a 10.2 months supply from a 9.6 month in March. Much of that inventory jump was due to sellers putting more homes on the market for the spring selling season.

"There cannot be any true talk of a housing correction until we see unsold inventories in the 5-month range," said Bob Walters, the chief economist for Quicken Loans.

The market has failed to move ahead despite several factors helping to drive sales. On the plus side: Prices have sunk nearly 20% during the past 12 months; mortgage rates are historically low; and the first-time homebuyers tax credit effectively discounts homes by up to $8,000 for qualified buyers. Offsetting those positives are the troubles in the overall economy, including the jump in unemployment from about 5% 12 months ago to 8.9% in April.

The gloomy economic news discourages potential buyers, according to Tom Kunz, CEO of real estate broker Century 21. "Look at the average consumers," he said. "They come home and turn on the news and hear about another large corporation laying off workers. They're saying, 'Oh my gosh. What do I do?'"

Mostly, they're not buying. Even falling prices, usually a stimulus for potential homebuyers, is currently a double-edged sword. Lower prices encourages some to buy while simultaneously convincing others to wait because they think prices will drop further.

Kunz said timing the market that way is often a mistake. Not only can buyers miss the bottom but mortgage rates can rise from the current low rates and the increase could wind up costing consumers money.