Sales of previously owned U.S. homes unexpectedly dropped in March, showing uneven progress in the industry.
Purchases of previously owned houses, tabulated when a contract closes, fell 0.6% to a 4.92 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of 75 economists surveyed by Bloomberg projected sales would increase to a 5 million rate. Prices climbed, reflecting more demand for higher- priced houses.
Historically low mortgage rates, rising property values and employment gains have helped mend the U.S. housing market, a source of strength for the world’s largest economy a boost. At the same time, a drop in the inventory of cheaper properties for sale compared with last year may be restraining the pace of progress in the industry.
“Housing will remain a positive for the economy, but there should be some slowing in the next few months,” David Sloan, a New York-based senior economist at 4Cast Inc., said before the report. “The slowing is temporary. There is a shortage of supply. The housing market will revive.”
Stocks fell after the report, with the Standard & Poor’s 500 Index declining 0.2% to 1,552.78 at 10:03 a.m. in New York.
Sales estimates in the Bloomberg survey ranged from 4.9 million to 5.2 million. The prior month’s pace was revised to 4.95 million from a previously reported 4.98 million.
Existing-home purchases, counted when contracts close, are recovering from a 13-year low of 4.11 million in 2008. Annual sales peaked at 7.08 million in 2005. A total of 4.66 million previously-owned houses were sold in 2012.
Compared with a year earlier, purchases increased 7.2% in March on an unadjusted basis, today’s report showed.
The median price of an existing home rose 11.8%, the most since November 2005, to $184,300 last month from $164,800 in March 2012.
The number of previously owned homes on the market rose to 1.93 million in March from 1.9 million a month earlier, according to today’s report. At the current sales pace, it would take 4.7 months to sell those houses compared with 4.6 months at the end of February. The group has said supply in the six-months range is “normal.”
The inventory of unsold homes was 2.32 million a year earlier.
The supply of homes is “plentiful on the upper end of prices. There’s very little inventory on the lower end,” Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released.
Real-estate activity is being stoked by cheaper borrowing costs and an improving labor market. The average rate for a 30- year fixed mortgage fell to 3.41% in the week ended April 18, the third consecutive drop, according to Freddie Mac. The rate declined to a record low of 3.31% in November.
Higher home prices have also boosted household wealth. Property values rose 10.2% in the 12 months through February, the biggest gain in almost seven years, according to Irvine, California-based CoreLogic Inc.
Builders are responding by stepping up construction, providing a boost for the expansion. They broke ground on new homes in March at the fastest pace in almost five years, the Commerce Department said April 16.
Contacts in most districts of the Federal Reserve system said “residential and commercial real estate improved markedly” with rising property values and demand for home loans that was “steady to slightly up,” according to its Beige Book business survey, which covers the period from late February to early April.
The strength in housing is spilling over into other parts of the economy such as manufacturing.
“We’re encouraged by the sustained improvement in housing sales, new home construction, rising housing prices, reduced inventories, historically low mortgage rates, and the best housing affordability in years, all of which combined to create a positive environment for our company and our industry,” Paul Toms, chief executive officer at Martinsville, Virginia-based furniture maker Hooker Furniture Corp., said on an April 15 earnings call.