Existing-home sales, tabulated when a contract closes, are recovering from a 13-year low of 4.11 million reached in 2008. Annual purchases peaked at a record 7.08 million in 2005.
Federal Reserve policy makers yesterday maintained record accommodation as rising borrowing costs showed signs of slowing the expansion.
“The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said in a statement after its two-day meeting. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”
The rate on 30-year home loans averaged 4.57% in the week ended Sept. 12, close to the highest level since July 2011, according to data from McLean, Virginia-based Freddie Mac. The rate, which had been as low as 3.81% at the end of May, has been rising since Fed Chairman Ben S. Bernanke that month indicated the central bank may slow asset purchases.
The jump in mortgage costs is unlikely to halt the nation’s housing recovery, Red Bank, New Jersey-based Hovnanian Enterprises Inc. said. The company reported a profit for its fiscal third quarter as net contracts climbed 1.8% and the contract backlog, an indication of future sales, jumped 18% to 2,893 homes.
The company is confident any hesitancy from its customers caused by the jump in borrowing costs “will be a temporary bump in the road to housing recovery,” Chief Executive Officer Ara Hovnanian said on a Sept. 9 conference call with analysts.
PulteGroup Inc., based in Bloomfield Hills, Michigan, expects the run-up in borrowing costs will vary across consumer segments, James Zeumer, head of investor relations, said on a Sept. 10 teleconference. For first-time buyers, a half- percentage-point rise in interest rates means “there will be some of them that will be out of the game,” he said, while the move-up buyers “have a little bit more flexibility.”
Builders began work on fewer homes than projected in August, Commerce Department figures showed yesterday. Housing starts rose 0.9% to an 891,000 annual rate, lower than the 917,000 median forecast in a Bloomberg survey of economists and following the prior month’s 883,000 pace. Permits, a proxy for future projects, dropped more than estimated.