Pending Sales of Existing Homes in U.S. Rebounded in July
Americans signed more contracts to purchase previously owned homes in July, a sign housing will keep strengthening in the second half.
The index of pending home resales climbed 2.4 percent, exceeding the 1 percent gain median forecast of 39 economists surveyed by Bloomberg, figures from the National Association of Realtors showed today in Washington. The gauge rose to 101.7, the highest since April 2010.
Home buying is coming within reach for more Americans as less expensive properties and record-low borrowing costs combine to stabilize the industry that helped trigger the recession. Faster hiring and easier access to credit are needed to reduce foreclosures, a hurdle to a more sustained recovery.
“All the elements are in place for continued growth in the housing industry,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “Housing is one of the bright spots in the economy.”
Stocks were little changed after the report as investors awaited comments from Federal Reserve Chairman Ben S. Bernanke in two days on the state of the economy. The Standard & Poor’s 500 Index rose 0.1 percent to 1,411 at 10:18 a.m. in New York.
Estimates in the Bloomberg survey ranged from a drop of 1.5 percent to a rise of 6.6 percent. Signings rebounded from a 1.4 percent fall in June that was the same as previously estimated.
The world’s largest economy cooled less than previously estimated in the second quarter, another report today showed. Gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent, revised Commerce Department figures showed. That followed a 2 percent first-quarter gain.
Three of four regions showed an increase in pending sales, according to today’s report from the real-estate agents’ group. That included a 5.2 percent gain in the South, and a 3.4 percent advance in the Midwest. The number of contracts in the West dropped 1.7 percent.
Compared with a year earlier, the index increased 15 percent after an 8.4 percent gain in the prior 12-month period.
Pending home sales are considered a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a contract closes, typically a month or two later, and made up more than 90 percent of the housing market last year.
Other figures signal demand is improving. Purchases of new homes, logged when contracts are signed, rose more than forecast in July to match a two-year high, Commerce Department data showed. Previously owned house sales rebounded from an eight- month low, the Realtors group reported.
Property values are also recovering. The S&P/Case-Shiller index of home prices in 20 cities climbed in June from a year earlier, the first gain since September 2010, a report from the group showed yesterday. Nationally, prices jumped in the second quarter by the most in more than six years.
Companies in related industries are benefiting from the pickup. Home Depot Inc. (HD), the largest U.S. home-improvement retailer, reported second-quarter profit that topped analysts’ estimates and raised its forecast for earnings this year as customers spent more on remodeling projects.
There are “signs of gradual improvement within the overall housing market,” Chief Executive Officer Frank Blake said on a conference call with analysts Aug. 14.
At the same time, foreclosures remain a risk, albeit one that is easing. Distressed sales accounted for 24 percent of existing-home purchases in July, the Realtors data last week showed. That’s less than the prior month and down from 29 percent in July 2011. Such sales are comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage.
Borrowing costs are also attractive. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac. It was 3.66 percent last week.
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