Purchases of previously owned homes climbed in April to the highest level in more than three years, to an annual rate of 4.97 million, the National Association of Realtors reported yesterday. The median price of a property rose 11%, to $192,800, from a year earlier. It was the fifth consecutive month that property values advanced more than 10% year over year, the data show.
Demographic shifts are helping fuel growing demand. More young people are forming households and retirees are moving into new homes, according to Robert O’Shaughnessy, chief financial officer at Bloomfield Hills, Michigan-based PulteGroup, the largest U.S. homebuilder by revenue.
“There is a limited number of units on the ground,” O’Shaughnessy said at a May 21 conference. “In many markets you’ve got below three months’ supply of actual housing available for sale. So when folks are actually out shopping, new becomes an even better alternative, being it’s one of the only things around.”
Confidence among homebuilders improved in May as prospective buyer traffic picked up along with sales, a report showed last week. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 44 from a revised 41 in April, the Washington-based group said.
The average rate on a 30-year fixed mortgage was 3.59% this week, down from 3.78% a year earlier, according for data from Freddie Mac. The rate reached a record low of 3.31% in November.
Record monetary stimulus from the Federal Reserve is helping keep borrowing costs low. Chairman Ben S. Bernanke yesterday signaled little appetite for paring the central bank’s bond purchase program.
“A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke told the Joint Economic Committee of Congress in Washington.
Further progress in housing may be gradual as as Americans begin to feel the effects of higher taxes that took effect in January at the same time government budget cuts take hold, Lowe’s Chairman and Chief Executive Office Robert Niblock said.
“The housing market continues to show convincing signs of life,” Niblock said on a May 22 earnings call. “However, growth in other key indicators, particularly employment, slowed in the first quarter. We expect growth to remain modest through mid-year as consumers adjust to higher taxes and the fiscal drag intensifies.”