U.S. Existing-Home Sales Probably Rose

Photographer: Andrew Harrer/Bloomberg

Potential homebuyers Cindy Cho, right, and Bob Wood look through a five-bedroom row house for sale in the Logan Circle neighborhood of Washington. Close

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Photographer: Andrew Harrer/Bloomberg

Potential homebuyers Cindy Cho, right, and Bob Wood look through a five-bedroom row house for sale in the Logan Circle neighborhood of Washington.

Sales of previously owned U.S. homes probably increased in March as a drop in mortgage rates propelled demand to its strongest quarter in almost two years.

Purchases climbed 0.7 percent to a 4.62 million annual rate from 4.59 million in February, according to the median estimate of 72 economists in a Bloomberg News survey. Sales in the first three months of the year would average 4.61 million at an annual pace, the best since April through June 2010. Jobless claims declined last week, other data may show.

An improved labor market, mortgage rates near historic lows and cheaper properties are shoring up an industry that’s been the economy’s soft spot. At the same time, further progress in residential real estate is being challenged by distressed properties and the threat of more foreclosures.

“Better jobs, better income, better affordability and lower mortgage rates mean you will sell more homes,” said Stuart Hoffman, chief economist of PNC Financial Services Group in Pittsburgh.

The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ estimates range from 4.5 million to 4.75 million.

Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.

Warmer Weather

Purchases in the first three months of 2012 may have benefited from warmer weather, which put more Americans in the mood to go house-hunting. The average temperature was 51.1 degrees Fahrenheit (10.6 degrees Celsius) last month, 8.6 degrees warmer than the 20th century average for March, according to the National Oceanic and Atmospheric Administration. The first quarter of 2012 was the warmest since record-keeping began in 1895.

Lower borrowing costs are doing their part as well. The average rate on a 30-year fixed mortgage fell to 3.88 percent last week, close to the record-low of 3.87 percent reached in February, according to data from Freddie Mac.

Mortgage revenue helped Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), the two most-profitable banks last year, top first- quarter estimates, the companies reported this month.

“On the housing side, we’re seeing improvement, and we’ve been seeing that for some time, but we’re seeing it more,” Wells Fargo Chairman and Chief Executive Officer John Stumpf said in an April 13 earnings call.

Seeing Improvement

“When you have the dynamics of higher rental rates and lower home values at great financing rates, there’s a point in time where the market’s going to clear and you’re going to see improvement,” Stumpf said. “We’re getting very close to that tipping point.”

Homebuilder shares have outperformed the broader stock market this year. The Standard & Poor’s Supercomposite Homebuilder Index (S15HOME) of 11 builders has gained 21 percent, compared with a 10 percent increase for the broader S&P 500.

A report at 8:30 a.m. may show the labor market is also conducive to stabilization in housing. First-time filings for unemployment benefits dropped to 370,000 last week from 380,000, according to the median estimate in a Bloomberg survey before the Labor Department’s figures.

The improvement in real estate has been uneven as recent reports have shown. More than three years after the 2008 subprime credit collapse drove many lenders from the mortgage market, home loans remain difficult to get for some.

Home Starts

Home starts slowed in March to a five-month low, the Commerce Department said this week. Beginning construction dropped 5.8 percent during the month.

Confidence among U.S. homebuilders decreased to a three- month low in April. The National Association of Home Builders/Wells Fargo index fell to 25 from 28 in March, the Washington-based group said on April 16. Readings below 50 mean more respondents said conditions were poor.

To help hold down borrowing costs like mortgage rates, Federal Reserve policy makers last month said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist. The program is scheduled to come to a close by the end of June.

                    Bloomberg Survey

====================================================
                           Initial    Exist    Exist
                            Claims    Homes    Homes
                            ,000’s     Mlns     MOM%
====================================================

Date of Release              04/19    04/19    04/19
Observation Period          14-Apr    March    March
----------------------------------------------------
Median                         370     4.62     0.7%
Average                        370     4.62     0.6%
High Forecast                  390     4.75     3.5%
Low Forecast                   350     4.50    -2.0%
Number of Participants          47       72       72
Previous                       380     4.59    -0.9%
----------------------------------------------------
4CAST                          372     4.65     1.3%
ABN Amro                      ---      4.61     0.5%
Action Economics               355     4.75     3.5%
Aletti Gestielle              ---      4.63     0.9%
Ameriprise Financial           375     4.63     0.9%
Analytical Synthesis          ---      4.65     1.3%
Banca Aletti                   375     4.65     1.3%
Bank of Tokyo-Mitsubishi       365     4.60     0.2%
Bantleon Bank AG              ---      4.60     0.2%
Barclays Capital               375     4.64     1.1%
BBVA                           375     4.65     1.3%
BMO Capital Markets            366     4.70     2.4%
BNP Paribas                    365     4.60     0.2%
BofA Merrill Lynch             370     4.50    -2.0%
Briefing.com                   375     4.68     2.0%
Capital Economics             ---      4.65     1.3%
CIBC World Markets            ---      4.65     1.3%
Citi                           370     4.65     1.3%
ClearView Economics           ---      4.65     1.3%
Comerica                      ---      4.65     1.3%
Commerzbank AG                 385     4.55    -0.9%
Credit Agricole CIB           ---      4.63     0.9%
Credit Suisse                  365     ---      ---
Daiwa Securities America      ---      4.60     0.2%
Danske Bank                   ---      4.61     0.4%
DekaBank                      ---      4.60     0.2%
Desjardins Group               360     4.55    -0.9%
Deutsche Bank Securities       390     4.65     1.3%
Exane                         ---      4.59     0.0%
Fact & Opinion Economics       375     4.61     0.4%
First Trust Advisors           372     4.64     1.1%
FTN Financial                 ---      4.61     0.4%
Helaba                         365     4.60     0.2%
High Frequency Economics       390     4.70     2.4%
HSBC Markets                   366     4.62     0.7%
Hugh Johnson Advisors          370     4.50    -2.0%
IDEAglobal                     365     4.75     3.5%
IHS Global Insight            ---      4.62     0.7%
Informa Global Markets         365     4.55    -0.9%
ING Financial Markets          355     ---      ---
Insight Economics              360     4.65     1.3%
Intesa Sanpaulo               ---      4.60     0.2%
J.P. Morgan Chase              375     4.55    -0.9%
Janney Montgomery Scott       ---      4.58    -0.2%
Jefferies & Co.                385     4.60     0.2%
Landesbank Berlin              370     4.60     0.2%
Landesbank BW                 ---      4.65     1.3%
Market Securities             ---      4.55    -0.9%
MET Capital Advisors          ---      4.60     0.2%
Mizuho Securities              370     4.57    -0.5%
Moody’s Analytics              375     4.67     1.7%
Morgan Stanley & Co.          ---      4.60     0.2%
National Bank Financial       ---      4.59     0.0%
Natixis                       ---      4.64     1.1%
Nomura Securities             ---      4.60     0.2%
Nord/LB                        370     ---      ---
OSK Group/DMG                 ---      4.62     0.7%
O’Sullivan                     370     ---      ---
Parthenon Group                358     4.63     0.9%
Pierpont Securities            375     4.55    -0.9%
PineBridge Investments         378     4.75     3.5%
PNC Bank                      ---      4.65     1.3%
Raymond James                  355     4.62     0.7%
RBC Capital Markets            355     4.50    -2.0%
RBS Securities                 380     4.65     1.3%
Scotia Capital                ---      4.60     0.2%
Societe Generale               350     4.65     1.3%
Standard Chartered             380     4.55    -0.9%
Stone & McCarthy Research      380     4.62     0.7%
TD Securities                  370     4.63     0.9%
UBS                            370     4.62     0.7%
University of Maryland         360     4.58    -0.3%
Wells Fargo & Co.             ---      4.61     0.4%
WestLB AG                     ---      4.65     1.3%
Westpac Banking Co.            375     4.57    -0.5%
Wrightson ICAP                 375     4.59     0.0%
====================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net.

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