By Michelle Jamrisko May 22, 2014
Previously owned U.S. home purchases increased in April as a bigger supply of properties lured buyers and raised prospects for a stronger spring buying season.
The 1.3 percent gain, the first this year, pushed sales to a 4.65 million annualized rate, National Association of Realtors data showed today. The number of available properties climbed to an almost two-year high, helping slow the pace of price appreciation.
A pickup in real-estate listings that improves affordability will help bring homeownership within reach of more Americans, increasing the odds the industry will recover from a yearlong slowdown. A gain in home construction last month showed builders are responding to limited inventory at the same time mortgage rates retreat and lure prospective buyers.
“The improvement in availability suggests stronger sales activity in the months ahead,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of existing home sales in the last two years, according to data compiled by Bloomberg. Still, “we need to see more building activity.”
More building permits last month helped boost the index of leading indicators by 0.4 percent after a 1 percent March gain that was the strongest since September, the New York-based Conference Board’s report showed today. The measure indicates the world’s largest economy will strengthen in the next three to six months after a first-quarter slowdown.
“If consumers continue to spend, and businesses pick up the pace of investment, the industrial core of the economy will benefit and GDP growth could move closer towards the 3 percent range,” Ken Goldstein, an economist at the Conference Board, said in a statement.
Stocks rose, sending the Standard & Poor’s 500 Index near a record amid a rebound in small-cap shares. The S&P 500 climbed 0.2 percent to 1,892.49 at the close in New York.
Economists surveyed by Bloomberg projected a 4.69 million pace of previously owned home sales. Estimates of 75 economists ranged from 4.6 million to 4.82 million after a 4.59 million pace in March that was the weakest since July 2012.
The report still contained figures that show housing is far from hitting its stride. Compared with a year earlier, purchases were down 7.3 percent. The gain from a month earlier was limited to stronger results in the West and the South.
Investors continued to play a big role in the market, the April increase was driven mainly by purchases of condominiums and the share of first-time buyers was little changed. Lower limits on loans guaranteed by the Federal Housing Administration have also taken a toll.
“There’s not that many first-time buyers who are getting into the market,” said Stephanie Karol, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We see a turnaround happening slowly.”
Sustained employment gains would give housing a further boost and lift consumers’ spirits at the same time. Another report today showed uneven labor-market improvement. The number of Americans filing for unemployment insurance increased by 28,000 to 326,000 in the week ended May 17 from a seven-year low in the prior period, according to the Labor Department.
Consumers’ expectations for the economy deteriorated to a seven-month low in May, data today from the Bloomberg Consumer Comfort Index showed. An expectations gauge that tracks where the economy is heading declined to 42.5 from 48 a month earlier. The share of respondents who said the economy was getting worse climbed to the highest level of the year.
The report from the Realtors group showed the number of previously owned homes on the market rose 16.8 percent to 2.29 million, the highest since August 2012. At the current sales pace, it would take 5.9 months to sell those houses. Less than a five months’ supply is considered a tight market, the NAR has said.
The sales increase in April “is welcoming,” Lawrence Yun, NAR’s chief economist, told reporters as the figures were released. “I feel optimistic you would trend higher generally. Now with more inventory, I think there will be more buyers entering the market.”
The median selling price of an existing home rose 5.2 percent from April 2013 to $201,700. The year-over-year increase was the smallest since March 2012. Some 44 percent of transactions last month were for properties valued between $100,000 and $250,000. Homes costing less than $100,000 accounted for 17.5 percent.
Investors accounted for 18 percent of the home purchases last month, up from 17 percent a month earlier. Seven of 10 investors paid cash. All-cash transactions accounted for about 32 percent, about the same share as the last year, the report showed. First-time buyers represented 29 percent of all transactions.
Sales of single-family homes increased 0.5 percent to an annual rate of 4.06 million. Purchases of multifamily properties — including condominiums and townhouses — jumped 7.3 percent to a 590,000 pace.
Potential buyers are starting to find relief in cheaper borrowing costs. The average rate on a 30-year, fixed mortgage fell to 4.14 percent in the week ended today, the lowest since October, according to Freddie Mac in McLean, Virginia.
Home-improvement retailers Home Depot Inc. (HD:US) and Lowe’s Cos. (LOW:US) are sticking to forecasts for improved sales this year after demand cooled at the start of the year because of harsh weather.
While the long winter held receipts at Lowe’s established stores to a 0.9 percent gain in the quarter ended May 2, trailing the 5 percent increase analysts estimated, the Mooresville, North Carolina-based company maintained its forecast that revenue by that measure would advance 4 percent this year.
“Performance has improved in May which, together with our strengthening execution, gives us confidence to reaffirm our sales and operating profit outlook for the year,” Robert Niblock, chief executive officer of the second-largest U.S. home-improvement retailer, said in a statement.
Home Depot, the largest home-improvement retailer, reported somewhat similar results yesterday. While first-quarter sales and profit trailed analysts’ estimates, ending six straight years of exceeding or meeting projections, the chain reiterated its forecast that revenue would gain 4.8 percent this year and boosted its projection for profit.
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