Repeat buyers, low prices boost sales of existing homes

— -- More repeat buyers appear to be buying homes, contributing to a slight uptick in existing-home sales this spring. First-time buyers' share of existing-home sales in April declined to 40% from over half in March, according to the National Association of Realtors. The majority of buyers are now repeat buyers, which includes owner-occupants who are moving up to larger or more expensive homes. Investors make up the rest of the market.

Sales of existing homes last month rose 2.9% to a seasonally adjusted annual rate of 4.68 million units from 4.55 million in March, the NAR reported Wednesday. Still, that was 3.5% below April 2008 levels. Home sales are rising in areas that have had a large number of foreclosures, such as California, Nevada and Florida.

Activity from repeat buyers is important for increasing sales of midprice homes and for clearing out inventory of unsold homes. At the end of April there were 3.97 million existing homes for sale, a 10.2-month supply at the current sales pace, compared with a 9.6-month supply in March. Economists say a six-month supply is healthy.

"During the spring season we see existing-home owners put their homes on the market," says Lawrence Yun, chief economist at NAR. "First-time buyers are releasing the existing-home owners, who are then able to sell to make their purchases. It's a chain reaction."

But the market may not yet be drawing large numbers of repeat buyers who are trading up to larger or more expensive homes.

"The move-up buyers aren't there. People are sitting on the sidelines trying to judge the market," says Coldwell Banker CEO Jim Gillespie. "I believe it's more investors."

Some economists say that even with more repeat buyers and a tax credit for first-time home buyers, the housing market's recovery is still faltering because of the economy and job losses.

"Sales will continue to drop in the second half of the year, because the economy is losing so many jobs and the GDP (gross domestic product) is still dropping," says Patrick Newport at IHS Global Insight.