US home resales rise, boding well for economic recovery
The pace of sales for existing US homes in April rose to its fastest in nearly two years and a fall-off in foreclosures helped cause anunexpected jump in prices,hopeful signs for the country’seconomic recovery.
Home resales increased 3.4per cent to an annual rate of 4.62 million units last month, the National Association of Realtorssaid last Tuesday.
Housing has been one of the economy’s weakest links as it recovers from the 2007-09 recession, but many economists think the sector will actually add to economic growth in 2012 for the first time since 2005.
The report on April resales supports that view and helps to dampen fears the recovery was stagnating after a report earlierthis month showed tepid job growth in April.
“We’re still some way from looking at an encouraging picture of the US economy, though when it comes to housing every littlebit helps,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.
The annual sales pace was the fastest since May 2010. That was in line with expectations and pushed US stock prices higher.
US Treasuries prices fell as investors awaited news on how Europe will tackle its debtcrisis, which continues to loom over the US economy. Nationwide, the median price for a home resale jumped to €140,227 in April, up 10.1 per cent from a year earlier.
That was the largest year-over-year gain since January 2006, and the NAR attributed the gains in part to a drop in homes sold following foreclosures. So-called distressed sales accounted for 28 per cent of resales, down from 29 per cent in March.
Still, Wall Street analysts were cautious about taking the increase as a sign home values were at the cusp of a big comeback. NAR’s calculations for prices may have been skewed by larger homes coming onto the market, analysts and the NAR said.
NAR economist Lawrence Yun said some seasonal factors might have played a role in the price increase because families tend to buy in the spring, which means bigger homes comprise a larger share of total sales.
“It does echo the message sent by most other related measures that have shown house pricesstabilising or firming,” said Daniel Silver, an economist at JPMorgan.
Home prices, as measured by the S&P/Case Shiller composite index, have fallen by about a third since mid-2006. Yun said prices may rise by one or two percent this year.
Last month, the number of unsold homes in the market appeared to contract a little.
The NAR estimated the number of existing single family homes for sale would supply the marketfor 6.3 months, down from 6.5 months in March.
Total inventories rose 9.5 per cent to 2.54 million, although that reading is not adjusted for seasonal shifts and April tends to be a big month for new homes going on the market, the NAR said.
The number of unsold homes on the market has fallen sharply over the last year and is currently at similar levels to those in 2004. The NAR’s reading for inventories, however, doesn’t include the country’s so-called “shadow inventory” – homes thatwill eventually hit the market following a foreclosure.
Economists increasingly think the housing sector has hit bottom after being devastated by a collapsed bubble in prices.
The head of US housing strategy at Morgan Stanley, Oliver Chang, is optimistic enough that he is leaving his firm to start his own buy-to-rent housing fund.
Chang’s move comes at a time when many hedge funds and private equity firms are raising money to buy foreclosed homes. The intent is to rent them out for several years before selling them as the housing recovery takes hold.