By Courtney Schlisserman
Aug. 4 (Bloomberg) -- The number of contracts to buy previously owned homes in the U.S. rose in June for a fifth straight month and exceeded economists’ forecasts, as lower prices and mortgage rates attracted buyers.
The 3.6 percent gain in the index of signed purchase agreements, or pending home resales, followed a 0.8 percent gain the prior month that was larger than previously estimated, the National Association of Realtors said today in Washington.
Foreclosure-driven declines in home values and tax incentives are putting houses within reach of first-time buyers, helping to stabilize the real-estate market, which has been the biggest drag on economic growth. At the same time, with mortgage rates no longer dropping and unemployment still rising, it may be months before a sustained recovery in housing takes hold.
“It’s a modest recovery, however these numbers are exceeding people’s expectations,” said David Sloan, senior economist at 4Cast Inc. in New York, one of three forecasters who shared the highest projection in a Bloomberg News survey. Nonetheless, he said, while there are “genuine signs” of recovery in housing and manufacturing, “the consumer is still the big sort of worry.”
Economists forecast the index would increase 0.7 percent, after an originally reported 0.1 percent gain in May, according to the median of 35 projections in the Bloomberg survey. Estimates ranged from a 1.2 percent drop to a 3 percent gain.
Incomes, Spending
A report from the Commerce Department today showed personal incomes tumbled 1.3 percent in June, more than forecast and the biggest drop in four years. The report showed spending rose 0.4 percent as prices climbed. Adjusted for inflation, purchases fell 0.1 percent, the report showed.
Incomes had jumped in May by the most in a year as tax cuts and the Obama administration’s stimulus package pushed the U.S. savings rate to a 15-year high.
Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005.
All four regions in the U.S. saw an increase in pending sales, today’s report showed, led by a 7.1 percent gain in the South and a 2.9 percent increase in the West.
“Activity has been consistently much stronger for lower priced homes,” NAR chief economist Lawrence Yun said in a statement, noting that first-time buyers must see their contracts close by Nov. 30 to get an $8,000 tax credit.
Affordability Index
The agents’ association said July 23 that home resales in June rose for a third straight month, supporting the case that the industry’s downturn, now in its fourth year, will end in 2009. The median price dropped 15 percent from a year earlier.
Sales of new homes soared 11 percent in June, the most since 2000, according to Commerce data released July 27.
The Realtors’ group’s affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 178.8 in April. The index was at 159.2 in June. Readings greater than 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs.
M.D.C. Holdings Inc., the Denver-based builder of Richmond America Homes, said July 31 that its orders had increased on a quarterly basis for the first time in four years.
“Building and sales activity for the industry overall improved from historic lows recorded earlier this year,” M.D.C. Chief Executive Officer Larry Mizel said in a statement.
Mortgage Rates
While mortgage rates have crept higher as the economy improves, they are still below year-earlier levels and near record lows. The average rate on a 30-year fixed mortgage was 5.25 percent in the week ended July 30, according to Freddie Mac, compared with 6.52 percent in the same week a year earlier. Rates reached an all-time low of 4.78 percent in late April.
A weak labor market is one reason economists say a rebound in housing will be slow to develop. The unemployment rate, which reached a 25-year high of 9.5 percent in June, may exceed 10 percent by early 2010, according to the median forecast of economists surveyed by Bloomberg last month.
The Labor Department is scheduled to release July payrolls data on Aug. 7.
Rising defaults and foreclosures may depress property values for months, making buying a home risky even though such purchases become more affordable and perpetuating a difficult climate for homebuilders.
Foreclosure filings reached a record 1.5 million in the first half of the year, according to data from RealtyTrac Inc., an Irvine, California-based seller of default data.
Ryland Group Inc., a California homebuilder that focuses on first-time buyers, reported a second-quarter loss on July 30 that was greater than analysts estimated. New orders fell 16 percent to 1,716 in the period, the company said.
No comments:
Post a Comment