Sales of U.S. existing homes increase from eight-month low
Sales of existing homes climbed in July from an eight-month low, adding to signs U.S. housing may pick up in the second half.
Purchases of previously owned houses, tabulated when a contract closes, increased 2.3 percent to a 4.47 million annual rate, figures from the National Association of Realtors showed today in Washington. The data were posted on the group’s website ahead of the usual 10 a.m. release time. The median forecast of 73 economists surveyed by Bloomberg called for a rise to a 4.51 million rate.
Buoyed by cheaper properties and record-low mortgage costs, demand for real estate is bolstering the industry that helped trigger the recession. Minutes of the Federal Reserve’s latest meeting, due later today, will be a reminder that policy makers are monitoring data such as housing to determine whether the world’s largest economy needs more stimulus.
“This is a continuation of good news, but we’ve got to continue to build momentum,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who forecast sales would rise to 4.46 million. “The home sales numbers are going to continue to go higher. As much as the employment numbers aren’t great, they aren’t horrible either, so those that have jobs are feeling a little bit better about their situations.”
Stocks were little changed, after the Standard & Poor’s 500 Index briefly topped a four-year high yesterday, as Japan’s exports slid and Greece sought more time on changes while investors awaited the Fed minutes. The S&P 500 Index fell less than 0.1 percent to 1,412.4 at 10:37 a.m. in New York.
Survey Results
Estimates in the Bloomberg survey ranged from 4.3 million to 4.8 million. The prior month’s pace was unrevised at 4.37 million, the lowest since October.
The median price of an existing home jumped 9.4 percent from a year earlier, the biggest 12-month gain since January 2006, to $187,300 from $171,200 in July 2011, today’s report showed.
Compared with a year earlier, purchases increased 11 percent before adjusting for seasonal variations.
The number of previously owned homes on the market climbed 1.3 percent to 2.4 million. At the current sales pace, it would take 6.4 months to sell those houses compared with 6.5 months at the end of the prior month. The group said it considers 6 months’ supply “normal.”
Regional Breakdown
Purchases increased in three of four regions, led by a 7.4 percent gain in the Northeast. Purchases in the West were unchanged.
Minutes of the Fed’s latest meeting, due later today, will be a reminder that policy makers are monitoring
The central bank has said it will “closely monitor” economic data and financial developments, according to a statement after its July 31-Aug. 1 gathering, at which policy makers determined they “will provide additional accommodation as needed” to accelerate the expansion.
“Despite some further signs of improvement, the housing sector remains depressed,” the Fed statement also said.
Of all purchases, cash transactions accounted for about 27 percent, down from 29 percent in June. First-time buyers made up 34 percent of the total, up from 32 percent in July 2011. Under “normal conditions,” entry-level purchasers account for about 40 percent, the Realtors group said.
Distressed Sales
Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 24 percent of the total, less than the share in the prior month and down from 29 percent in July 2011.
“It’s a meaningful decline,”, Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released. Of the distressed sales, 12 percent were foreclosed properties and 12 percent were short sales, he said.
Existing-home sales have improved since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.
Sales of new homes, counted when contracts are signed, may have rebounded to a 365,000 annual rate in July from 350,000 the prior month, the survey median showed ahead of Commerce Department figures due tomorrow.
Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade. Resales made up the rest.
Improving Profits
Construction companies are noting the increase in demand. PulteGroup Inc., the largest U.S. homebuilder by revenue, posted a better-than-estimated profit and a 32 percent jump in orders in the second quarter. AV Homes Inc., which develops properties in Florida and Arizona, said it closed on 41 percent more houses in the second quarter compared to a year earlier, and contracts signed, net of cancellations, more than doubled.
“The housing market continues to gain momentum,” Allen Anderson, chief executive officer of AV Homes, said on an Aug. 7 earnings conference call. “We are no longer battling the headwinds of the housing recession.”
Reports last week confirmed housing is improving. Building permits, a proxy for future work, jumped to a four-year high in July even as residential starts fell from the fastest pace in more than three years. The National Association of Home Builders/Wells Fargo index of builder confidence rose in August to the highest level since 2007.
Homes are more affordable. 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.
Foreclosures are abating, though they still pose a threat as borrowers struggle to pay bills. The mortgage delinquency rate, or the share of home loans at least 30 days late, rose in the second quarter from the previous three months, the first gain in a year, the Mortgage Bankers Association reported.
