Ahead of the Bell: US home sales
WASHINGTON (AP) — Economists are looking for home sales to keep rising, providing further evidence that housing is gaining momentum and helping provide a boost for the economy.
The National Association of Realtors will report on May sales of previously occupied homes at 10 a.m. EDT Thursday.
In April, sales rose to a seasonally adjusted annual rate of 4.97 million homes, the highest level in 3½ years. The sales pace in April was nearly 10 percent higher than a year earlier.
While sales are approaching the 5.5 million level considered to be a sign of a healthy market, activity has been held back by a tight supply.
The number of homes for sale rose 12 percent in April from March to 2.16 million. But inventory is still almost 14 percent lower than a year earlier.
The increase in inventories partly reflects the beginning of the spring selling season. The supply of homes would be exhausted in 5.2 months at the April sales pace. That's below the typical level of about six months.
Rising demand and tight supply has pushed up prices. The median price of a home for sale jumped 11 percent in April compared to April 2012 to $192,000. That's the highest in nearly five years. The median is the halfway point between the highest and lowest.
The rise in prices partly reflects sales of higher-priced homes. It also reflects a drop in sales of lower-priced foreclosed properties. The proportion of distressed sales has fallen sharply in the past year, to 18 percent of the market in April, down from 28 percent in April 2012. Distressed sales include foreclosed homes and homes in which the size of the mortgage exceeds the home's value.
First-time buyers made up 29 percent of sales in April, well below the 40 percent that is typical. First-time buyers usually help drive healthy markets. They purchase from existing homeowners, who then are able to move to larger houses.
Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. Those changes have left many would-be buyers unable to qualify for mortgage rates, which are up a big in the past few weeks but still remain near historic lows.
Housing has been a bright spot for the economy this year. U.S. builders stepped up home construction in May and applied for permits to build single-family homes at the fastest pace in five years.
Stronger housing markets are helping the economy grow and offsetting some of the drag this year from higher taxes and federal spending cuts. Federal Reserve Chairman Ben Bernanke cited housing in a news conference Wednesday as a major reason the Fed's economic outlook has improved despite the drag coming from the federal government.
A better outlook for housing has made builders more optimistic. The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 52, up from 44 in May. It was the highest reading in more than seven years and the largest monthly increase in more than a decade. A reading above 50 indicates more builders view sales conditions as good rather than poor.