Sales of previously owned U.S. homes rose in February to the highest level in more than three years, sustaining a rebound that is bolstering growth.
Purchases increased 0.8% to a 4.98 million annualized rate, the most since November 2009, figures from the National Association of Realtors showed today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for an increase to a 5 million pace.
Growing demand for homes combined with limited supply is pushing property values up, leading to gains in household confidence and wealth that are helping propel consumer spending. Easier access to credit and bigger gains in the labor market may be needed to give the housing market an additional boost and ensure it will keep contributing to the economy.
“Home sales are trending up at a moderate rate rather than at a rapid rate,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, who correctly forecast the February pace. “The inventories are said to be tight in many markets, and that’s holding sales back to a degree.”
Estimates in the Bloomberg survey ranged from 4.85 million to 5.15 million. The prior month’s pace was revised to 4.94 million from a previously reported 4.92 million.
Federal Reserve policy makers yesterday said they will continue to buy securities at a pace of $85 billion a month to spur economic growth and reduce unemployment.
Fed View
The central bank said it “continues to see downside risks to the economic outlook,” according to the statement. It also said the “the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive,” acknowledging that the federal budget cuts triggered at the start of the month may restrain growth.
Other reports todays showed claims for jobless benefits last week rose less than forecast, manufacturing in the Philadelphia region unexpectedly expanded in March and the index of leading indicators rose more than forecast in February.
Stocks held earlier losses after the report as German manufacturing unexpectedly contracted and Cyprus’s president worked on a new plan to obtain a European bailout. The Standard & Poor’s 500 Index fell 0.6% to 1,548.74 at 10:24 a.m. in New York. The benchmark index climbed yesterday to within seven points of its record reached in 2007.
Survey Results
The median price of an existing home increased to $173,600 last month, up 11.6% from February 2012, today’s report showed.
The number of previously owned homes on the market climbed to 1.94 million from 1.77 million in January. It was the first gain in supply since April.
At the current sales pace, it would take 4.7 months to sell those houses compared with 4.3 months at the end of January.
Month’s supply in this range will typically yield price increases in the “low single-digit” range, Lawrence Yun, NAR chief economist, said in a news conference as the figures were released.
The group today raised its forecast for the 2013 increase in median prices to 7% from a prior estimate of 4%.
Existing-home sales, tabulated when a contract closes, have recovered since reaching a 13-year low of 4.11 million in 2008. The market peaked at a record 7.08 million in 2005.
Market Breakdown
Resales accounted for about 93% of the residential market in 2012, and a total of 4.66 million previously owned houses were sold last year. That was the most since 2007 and up 9.4% from 2011.
The strength in demand has bolstered sales of new properties as well. Lennar Corp., the third largest U.S. homebuilder by revenue, said orders rose in the fiscal first quarter.
“Current market conditions are driven by strong demand resulting from low interest rates and attractive home prices, which have led to very affordable monthly payments, compared to increasing rental rates,” Chief Executive Officer Stuart Miller said in a statement yesterday. New orders, deliveries and backlog have “shown strong increases,” he said.
Housing starts climbed 0.8% last month to a 917,000 annualized pace, Commerce Department data showed this week. Permits for future construction rose 4.6% to a 946,000 rate, the most since June 2008.
Builder Rebound
At Toll Brothers Inc., the largest U.S. luxury-home builder, benefits from the uptick in the housing market are evident.
“We’re in recovery, it’s early, but it certainly feels like it’s real and it feels like it will be sustained,” Douglas C. Yearley, Toll Brother’s chief executive officer, said in a March 4 presentation. “We had a really good spring 2012 selling season. And now we’re having an even better spring 2013 selling season. We are beginning to have some real pricing power.”
Increasing property values are helping the market heal. The share of U.S. homeowners who owe more on their properties than the real estate is worth dropped by about 200,000 in the fourth quarter, CoreLogic Inc. said on March 19, down to 10.4 million homes. Home prices jumped 9.7% in the 12 months through January, the biggest gain since April 2006, according to Irvine, California-based CoreLogic.
Mortgage Rates
At the same time, near record-low borrowing costs are helping keep properties affordable. The average rate on a 30- year, fixed-rate purchase loan was 3.63% last week, compared with 3.92% a year ago, according to McLean, Virginia-based Freddie Mac. The 30-year rate reached a record- low 3.31% in November.
“One of the most powerful tools we have is bringing down mortgage rates and stimulating home-buying, construction, and related industries,” Fed Chairman Ben S. Bernanke said yesterday in a press conference. Financial institutions may have “gone too far” in setting requirements to obtain financing amid concerns about new regulations, he said. Banks “may have tightened the mortgage credit box more than would be desirable in a long-run, healthy economy,” Bernanke said.
