June 21 (Bloomberg) -- Sales of previously owned U.S. homes declined in May, showing an uneven recovery in residential real estate.
Purchases of existing properties dropped 1.5 percent to a 4.55 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 4.57 million pace.
The weakest employment gain in a year last month and limited access to credit are restraining a housing industry that’s been supported by record-low borrowing costs and cheaper properties that are drawing investors. The figures underscore Federal Reserve Chairman Ben S. Bernanke’s comments yesterday that the economy is failing to get a boost from a typical real-estate recovery.
“There’s a gradual bleeding into the market of distressed properties,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. “It’s a bumpy trajectory” for housing. “It’s going to be a gradual recovery.”
Estimates in the Bloomberg survey of 74 economists ranged from 4.40 million to 4.73 million.
Stocks declined after a Fed report showed manufacturing in the Philadelphia region contracted at the fastest pace in almost a year. The Standard & Poor’s 500 Index decreased 0.3 percent to 1,351.25 at 10:48 a.m. in New York.
The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 16.6 in June from minus 5.8 the previous month. Economists forecast the gauge would improve to zero, the dividing line between growth and contraction, according to the median estimate in a Bloomberg survey. The report covers eastern Pennsylvania, southern New Jersey and Delaware.
Another report today showed more Americans than forecast filed applications for unemployment benefits last week, indicating the labor market continues to struggle.
Jobless claims decreased by 2,000 to 387,000 in the week ended June 16, Labor Department figures showed today in Washington. The median forecast in the Bloomberg called for 383,000. The four-week average, a less volatile measure, climbed to the highest of the year.
Existing-home sales, which are tabulated when a contract closes, have climbed since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.
The median price of an existing home climbed 7.9 percent to $182,600 in May, the highest since June 2010, from $169,300 in May 2011, today’s report showed. The increase in May reflected more sales of higher-priced properties, according to Lawrence Yun, chief economist of the Realtors group.
The number of previously owned homes on the market decreased 0.4 percent to 2.49 million in May from a month earlier. At the current pace, it would take 6.6 months to sell existing inventory, compared with 6.5 months at the end of the prior period.
Sales of single-family homes decreased 1 percent to an annual rate of 4.05 million, while condominiums and co-op transactions fell 5.7 percent to a 500,000 pace.
Three of four regions showed sales declines, led by a 4.8 percent drop in Northeast. Purchases also fell in the West and South.
Of all purchases, cash transactions accounted for about 28 percent, down from 29 percent in April. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 25 percent of the total last month, the lowest since the group began tracking the data in 2008, down from 28 percent in April.
Investors accounted for 17 percent of purchases in May, a decrease from 20 percent in April. First-time buyers accounted for 34 percent of the market in May.
“First-time buyers are really not stepping up,” Yun said. Typically, first-time buyers make up 40 percent to 45 percent of the purchases, he said. Instead, most sales were homeowners who were trading up, he said.
Cheaper properties and lower mortgage rates pushed up homebuyer affordability to a record in the first quarter, according to the NAR. The average 30-year, fixed-rate mortgage dropped to a record-low 3.67 percent in the first week of June, according to figures from Freddie Mac.
“Demand for resales should be supported mainly by the investor activity, supported by historically high affordability,” said Yelena Shulyatyeva, U.S. economist at BNP Paribas, said before today’s report. “Traditional buying to own and live in should continue to be limited by tight lending standards.”
Foreclosures keep boosting the inventory of unsold homes and depressing prices. Foreclosure starts grew in May for the first time since January 2010, after the largest U.S. loan servicers settled with states over faulty documentation, according to a report last week from RealtyTrac Inc., a real estate data provider in Irvine, California.
New Jersey-based builder Hovnanian Enterprises Inc. is among companies that are more upbeat. The company reported a 52 percent increase in contracts in the second quarter compared with last year.
“It doesn’t feel like a head fake this year, it feels like it’s beginning of a recovery, so we’re very encouraged with what we’ve been seeing,” said Larry Sorsby, chief financial officer, said at a June 13 conference.
“There are some good signs in housing, but nevertheless we are not getting the size of the boost, the amount of help in the recovery we would normally get from a housing recovery,” Bernanke said yesterday at a press conference in Washington after the Fed announced it would extend a program aimed at bolstering the economy.
“Access to credit is a major issue,” Bernanke said. “Mortgage access is much tighter than it has been for a long time. What that does, to some extent, is it mutes the impact of the Fed’s actions.”
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