Pending Sales of Existing Homes in U.S. Climbed 1.5% in March
More Americans than forecast signed contracts in March to buy previously owned homes, another indication of progress in the housing market.
The index of pending home sales increased 1.5 percent after a revised 1 percent decline the prior month that was larger than initially reported, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1 percent increase, according to the median estimate in a Bloomberg survey.
Historically low borrowing costs and improvement in the labor market are helping power the housing market, boosting home prices and spurring the economic expansion. A pickup in property values may prompt more Americans to put their homes on the market and help alleviate a limited supply of available dwellings as the spring selling season begins.
“Now that the housing recovery is sustainable, it’s not about whether it’s up, it’s how fast,” Jonathan Basile, director of U.S. economics at Credit Suisse in New York, said before the report. “There’s now a different environment as unemployment continues to make new lows and we have persistently low interest rates.”
Estimates for pending home sales ranged from a decline of 1.5 percent to an increase of 2 percent, according to 34 economists surveyed by Bloomberg.
Another report today showed consumer spending rose more than projected in March, reflecting a jump in outlays for services that is unlikely to be repeated as the biggest part of the economy softens this quarter.
Household purchases, which account for about 70 percent of the economy, climbed 0.2 percent after a 0.7 percent gain the prior month, the Commerce Department said in Washington. The median estimate in a Bloomberg survey of 74 economists called for spending to be little changed. Incomes (PITLCHNG) increased less than forecast and inflation cooled to the lowest level in more than three years.
Today’s Realtors’ report showed pending home sales climbed 5.8 percent from March 2012 on an unadjusted basis.
Three of four regions showed an increase in contract signings from a month earlier, led by a 2.7 percent gain in the South. Pending home sales climbed 1.5 percent in the West and 0.3 percent in the Midwest. They were unchanged in the Northeast.
The index level for pending home sales was 105.7 on a seasonally-adjusted basis, the highest since April 2010. A reading of 100 coincides with the average level of contract activity in 2001 and “historically healthy” home-buying traffic, according to the NAR.
“Job additions and rising household wealth will continue to support housing demand,” NAR chief economist Lawrence Yun said in a statement accompanying the release. Because of limited availability of properties, “little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses.”
Last week, the group said existing-home sales dropped in March as a lean supply of properties kept the industry from generating a stronger recovery. Purchases of previously owned homes fell 0.6 percent to a 4.92 million annualized rate. The median price increased 11.8 percent from a year earlier.
Fewer available homes compared with last year has limited how fast the existing market can pick up and put upward pressure on prices and demand for newly-built dwellings. Sales of new U.S. homes advanced in March, completing the strongest quarter since 2008.
Historically low lending rates and a healing labor market are helping keep demand growing. The average rate for a 30-year fixed mortgage was 3.40 percent in the week ended April 25, down from 3.41 percent, according to Freddie Mac. In November, the rate reached an all-time low of 3.31 percent. The average 15- year rate dropped to a record-low 2.61 percent.
“Companywide, our sales and traffic have been strong,” Robert Schottenstein, president and chief executive officer of Columbus, Ohio-based builder M/I Homes Inc. (MHO), said during an April 25 earnings conference.
“The quality of traffic is also improving, with buyers having both a greater sense of optimism as well as a greater sense of urgency, no doubt fueled by the historically low interest rates, limited inventory both new and used and the fact that we’re also seeing rising prices in many markets and submarkets,” he said.
Economists consider pending home sales a leading indicator because they track contract signings. Existing homes sales are tabulated when a contract closes, usually a month or two later.
To contact the reporter on this story: Alex Kowalski in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Christopher Wellisz at email@example.com