From Wells Fargo Economics Group

The housing data remain confounding. Demand appears to be improving, but various reports on the market continue to give off conflicting signals. Existing home sales fell 3.3 percent in April to a still respectable 5.04 million unit pace.

The drop follows three months of strong gains in pending home sales, which represent purchase contracts for existing homes, and a steady improvement in mortgage applications to finance the purchase of a home. Demand has clearly perked up and realtors, mortgage lenders and homebuilders are all relatively upbeat.

Although the monthly home sales figures are volatile, the latest drop is eye catching because of its timing. April marks the start of the important spring home buying season and this year the housing market appears to have the wind at its back, with demand improving and mortgage rates remaining low.

Demand has clearly increased, but many buyers are having difficulty finding a home to buy due to the lack of available inventory. Bidding wars for homes have erupted all over the country, and with little new home supply in the pipeline, prices are likely to remain relatively firm for some time to come. A bigger mystery is why so few homeowners have been willing to put their homes on the market.

The median home price rose 8.9 percent over the past year to $219,400. This marks the 38th consecutive month of year-to-year price increases and the largest gain since January 2014. Prices for condominiums and co-ops were up a modest 0.4 percent, while the median price of an existing single-family home jumped 10 percent to $221,200.

Homes are selling quickly. The National Association of Realtors (NAR) noted that homes tended to sell in just 39 days, which was faster than any other month since July 2013 and marks the second shortest time homes have remained on the market since the NAR began tracking this statistic back in 2011.

Moreover, the NAR notes that close to 40 percent of the homes sold in April were sold at or above their asking price. Clearly, it is a sellers’ market today and hopefully that will draw more sellers out into the market later this year.

The lack of inventories and low levels of new construction mean that home prices will likely remain firm. Higher home prices will not make it any easier to bring first-time homebuyers back into the market. First-time buyers accounted for just 30 percent of home buyers in April, which was the same as in March and up from just 29 percent last April.

Source: NAR, U.S. Department of Commerce, FHFA, S&P Case-Shiller and Wells Fargo Securities