Previously owned U.S. home sales unexpectedly dropped in March as a lean supply of properties kept the industry from generating a stronger recovery.
Purchases of existing houses, tabulated when a contract closes, fell 0.6 percent to a 4.92 million annual rate, figures from the National Association of Realtors showed today in Washington. The median forecast of 75 economists surveyed by Bloomberg projected sales would increase to a 5 million rate.
A decline in the availability of distressed homes and still-tight access to credit are holding back buyers, impeding progress in a real-estate market that’s been a source of strength for the economy. Bigger gains may emerge when rising property values encourage more Americans to put their properties on the market.
“Despite some little turbulence, the residential housing market is still improving,” said Christophe Barraud, an economist at Market Securities-Kyte Group in Paris, who correctly forecast the rate of purchases. “We’re in a transition mode where distressed sales are falling and conventional sales are growing, which means stagnation in total home sales. This situation is not problematic because it shows the market is returning to normal.”
Distressed properties consist of foreclosures and short sales.
The median price of an existing home rose 11.8 percent, the most since November 2005, to $184,300 last month from $164,800 in March 2012. The gain reflected an increase in the share of sales of higher-priced dwellings compared with less-expensive properties.
Stocks rose as Caterpillar Inc. jumped and a rally in commodity prices spurred energy and raw-material producers. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,562.5 at the close in New York.
Elsewhere, Spain’s budget deficit was the largest in the European Union last year, underscoring the challenge faced by Prime Minister Mariano Rajoy as he prepares a plan to foster an economic recovery. Eurostat, the EU’s statistics agency in Luxembourg, today reported that Spain’s 2012 deficit widened to 10.6 percent of gross domestic product, swollen by the cost of bailing out its banking system. That’s up from 9.4 percent in 2011 and is worse than Greece’s gap of 10 percent.
Estimates for U.S. existing-home sales in the Bloomberg survey ranged from 4.9 million to 5.2 million. The prior month’s pace was revised to 4.95 million from a previously reported 4.98 million.
The number of previously owned homes on the market fell to 1.93 million in March from 2.32 million a year earlier. At the current sales pace, it would take 4.7 months to sell those houses compared with 4.6 months at the end of February.
The months’ supply figure may increase in April, when more Americans typically put their properties up for sale. Even so, it will likely be below the six-months’ supply that is typical, according to Lawrence Yun, NAR chief economist.
The supply of homes is “plentiful on the upper end of prices,” Yun said at a news conference today as the figures were released. “There’s very little inventory on the lower end.”
The rebound in housing is spilling over into other parts of the economy, benefiting companies such as Martinsville, Virginia-based furniture maker Hooker Furniture Corp.
“We’re encouraged by the sustained improvement in housing sales, new-home construction, rising housing prices, reduced inventories, historically low mortgage rates, and the best housing affordability in years, all of which combined to create a positive environment for our company and our industry,” Paul Toms, chief executive officer of Hooker Furniture, said on an April 15 earnings call.
Existing-home purchases are recovering from a 13-year low of 4.11 million in 2008. Annual sales peaked at 7.08 million in 2005. A total of 4.66 million previously-owned houses were sold in 2012.
Purchases of distressed properties accounted for 21 percent of the total, the least since NAR started collecting the data in October 2008. Of all purchases, cash transactions accounted for about 30 percent.
First-time buyers made up 30 percent of the total, the same as in February. Yun said “first-time buyers are struggling to get into the market,” where cheaper properties are in shorter supply.
The supply of homes priced at $100,000 or less fell to 4.5 months in March from 4.7 in the same period last year, the NAR said.
Sales of existing single-family homes decreased 0.2 percent to an annual rate of 4.32 million. Purchases of multifamily properties including condominiums and townhouses dropped 3.2 percent to a 600,000 pace, the report showed.
Sales decreased in two of four regions, led by a 1.7 percent decline in the West. Purchases fell 1.5 percent in the South, were unchanged in the Northeast and rose 1.8 percent in the Midwest.
Home sales are being underpinned by cheaper borrowing costs. The average rate for a 30-year fixed mortgage fell to 3.41 percent in the week ended April 18, the third consecutive drop, according to Freddie Mac. The rate slid to a record 3.31 percent in November.
Higher property prices have boosted household wealth. Values rose 10.2 percent in the 12 months through February, the biggest gain in almost seven years, according to Irvine, California-based CoreLogic Inc.
Builders are responding by stepping up construction, providing a boost for the economic expansion. They broke ground on new homes in March at the fastest pace in almost five years, the Commerce Department said April 16.
Contacts in most districts of the Federal Reserve system said “residential and commercial real estate improved markedly” with rising property values and demand for home loans that was “steady to slightly up,” according to the central bank’s Beige Book business survey, which covers the period from late February to early April.