Sales of U.S. Existing Homes Rise to One-Year HighMichelle Jamrisko
Sales of previously owned homes climbed in September to the highest level in a year, pointing to growing confidence in the U.S. economy as employment firms.
Purchases advanced 2.4 percent to a 5.17 million annual rate, the National Association of Realtors reported today in Washington. Demand was up 1.9 percent compared with the same month last year before adjusting for seasonal patterns.
Americans are returning to the real-estate market as employers have added 2 million workers to payrolls so far this year. Sales stand to get an additional boost in the final months of 2014 as the drop in mortgage rates caused by slowing growth in Europe and emerging nations makes properties more affordable for first-time buyers.
The decline in borrowing costs “is encouraging for the housing market recovery,” said Brittany Baumann, an economist at Credit Agricole CIB in New York, who projected sales would rise last month. “We see upward trajectory over the next few months, but it’s going to take further strengthening in the job market, low mortgage rates, and a special importance on easing of mortgage lending standards.”
Stocks surged, sending the Standard & Poor’s 500 Index to its biggest gain in a year, as investors speculated the European Central Bank will boost economic stimulus and Apple Inc. forecast record sales. The S&P 500 climbed 2 percent to 1,941.28 at the close in New York.
The increase in sales exceeded the median forecast of 77 economists surveyed by Bloomberg, which projected a gain to a 5.1 million annual rate. Estimates ranged from 4.95 million to 5.2 million.
“Job creation is good, we have low rates and more inventory is coming online,” Lawrence Yun, NAR chief economist, told reporters as the figures were released. The market “one year from now, two years from now, it will be better.”
At the current pace, employment would increase by 2.7 million this year, marking the biggest advance since 1999. The jobless rate dropped to a six-year low of 5.9 percent last month, according to figures from the Labor Department.
Declining borrowing costs will help bring homes within reach of more Americans. The average 30-year, fixed-rate mortgage fell to 3.97 percent in the week ended Oct. 16, the lowest since June 2013, according to Freddie Mac data. The rate has dropped by 0.22 percentage point over the past two weeks as concern over slowing global growth pushed investors out of stocks and into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.
Mortgages might be easier to come by after bank and housing regulators this week took steps to unlock homebuyer credit, which became more difficult to obtain in the wake of the 2008 financial collapse.
The Federal Deposit Insurance Corp. today abandoned a proposal that would have discouraged lenders from making loans with small down payments. On Monday, housing regulators said they were working on an agreement that would encourage banks to make loans guaranteed by the U.S. government.
Purchases increased in three of four regions, led by a 7.1 percent gain in the West, today’s report showed. Sales also rose in the Northeast and South.
Of all purchases, cash transactions accounted for about 24 percent, down from 33 percent 12 months earlier, the report showed. Investors, 63 percent of whom paid cash, represented 14 percent of the market last month, down from 19 percent in September 2013.
Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to take less than the balance of the mortgage, made up 10 percent of the total.
“The traditional buyer -- the person who takes out a mortgage loan to buy a home -- seems to be growing in strength over the past year and we expect that to continue,” said Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, who is among the best forecasters of existing home sales over the past two years, according to data compiled by Bloomberg.
First-time buyers remain one part of the market that has yet to return in full force. They accounted for 29 percent of purchases in September for a third month, below the historical average around 40 percent.
Easier lending standards and faster wage gains would attract more buyers making the first foray into ownership.
The share will “steadily increase with an improving economy and job creation,” Yun said.
Another report today showed payrolls rose in 39 states in September and the unemployment rate fell in 31, a sign the improvement in the labor market is broad-based.
“Unemployment is plummeting in many formerly problem states as the recovery spreads across the nation,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UJF Ltd. in New York, said in a research note.
States such as California and Nevada that were most hurt by the meltdown in residential real estate have shown the biggest declines in joblessness over the past year, he said.
Builders are also benefiting. Work began on more homes in September, Commerce Department data showed last week. Permits to build are also rising, up 1.5 percent from the prior month to a 1.02 million annualized pace.
“The housing market has entered a period of more modest growth than we experienced in 2012 and 2013,” Larry Seay, chief financial officer at Meritage Homes Corp., a Scottsville, Arizona-based builder, said at an Oct. 1 finance conference. “But we believe it is still in the early innings of recovery and has a potential to grow for many years.”
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