Sales of Existing Homes in U.S. Rise as Market Stabilizes
Sales of existing U.S. homes rose in April, driven by broad-based gains in demand that signal the market is stabilizing.
Purchases, tabulated when a contract closes, increased 3.4 percent to a 4.62 million annual rate, figures from the National Association of Realtors showed today in Washington. The median price jumped by the most in six years.
Owner-occupied properties are taking over from all-cash deals by investors snapping up distressed houses, the agent’s group said. Employment gains, depressed prices and record-low mortgage rates may bring more dwellings within reach of Americans, eliminating a source of weakness for the world’s largest economy just as risks from Europe’s debt crisis climb.
“We are making incremental progress,” said Millan Mulraine, a senior U.S. strategist at TD Securities Inc. in New York, who correctly forecast the sales pace. “People are becoming more confident about job prospects and about taking on mortgages. This is all positive for the economy.”
Stocks erased gains on concern that Greece was making preparations to exit the euro. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,316.63 at the close in New York. The S&P Supercomposite Homebuilder index climbed 1.9 percent.
The April sales pace was in line with the 4.61 million median forecast in a Bloomberg News survey. Estimates of the 73 economists ranged from 4.47 million to 4.8 million. The prior month’s pace was revised to 4.47 million, from a previously reported 4.48 million. April’s total was just shy of the 4.63 million reached in January that was the highest in almost two years.
Europe and Asia
Elsewhere, U.K. consumer prices climbed 3 percent in April from a year earlier after a 3.5 percent gain in the 12 months ended in March, the Office for National Statistics said today in London. The rate is within the government’s boundaries for the first time since February 2010.
Japan’s foreign investments and assets, meantime, grew to the second-highest level on record as companies used the stronger yen to make acquisitions abroad.
The U.S. real estate market’s improvement has been slow to evolve. Existing-home sales climbed to 4.26 million last year from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.11 million, the least since 1995. Resales may rise to a 4.6 million to 4.7 million range this year and reach as much as 4.8 million in 2013, the Realtors group projected this month.
“We are breaking out,” Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released. “With each passing month, there is job creation. Affordability has been very high. This is a very good combination.”
The median price of an existing home climbed 10 percent to $177,400 from $161,100 in April 2011, today’s report showed. It was the biggest year-to-year gain since January 2006 and reflected a seasonal mix in demand toward bigger houses and fewer distressed sales, Yun said.
Families return to the market at this time before the start of a new school year, pushing up demand, he said. Cash transactions, distressed properties and investors accounted for a smaller share of all purchases last month, he said.
Purchases improved in all four regions, led by a 5.1 percent gain in the Northeast.
The number of previously owned homes on the market climbed 9.5 percent to 2.54 million. At the current sales pace, it would take 6.6 months to sell those houses compared with 6.2 months in March. April is usually the peak, or close to the peak, month for inventory for the year, Yun said.
Sales of existing single-family homes increased 3 percent to an annual rate of 4.09 million, while those of multifamily properties, including condominiums and townhouses, rose 6 percent to a 530,000 pace.
The group’s affordability index, which is based on a combination of resale prices, household income and mortgage rates, reached a record high in the first quarter, a report this month showed.
Borrowing costs remain attractive. The average rate on a 30-year fixed mortgage fell to an all-time low of 3.79 percent in the week ended May 17, according to data from Freddie Mac going back to 1971. The average 15-year rate dropped to 3.04 percent, also a record low, the McLean, Virginia-based mortgage-finance company said.
Rising employment and incomes may provide more support for housing. The unemployment rate fell in April to a three-year low of 8.1 percent as employers added 115,000 jobs, according to Labor Department figures.
PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, said orders rose 15 percent to 4,991 homes in its first quarter, and backlogs increased 12 percent to 5,798 homes.
“It was the first quarter in several years that fundamental demand came in stronger than expected,” Richard Dugas, chief executive officer of the Bloomfield Hills, Michigan-based company, said during an April 26 conference call with analysts. “We are pleased with how the year has started off, including a continuation of better sales activity thus far in April.”
Foreclosure filings fell to a five-year low in April as lenders sought to avoid seizing property. The number of default, auction and seizure notices sent to homeowners totaled 188,780 last month, down 14 percent from a year earlier and 5 percent from March, according to RealtyTrac Inc.
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