More Americans than forecast signed contracts to purchase previously owned homes in May, indicating the real estate industry is firming three years after the start of the economic recovery.
The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April, figures from the National Association of Realtors showed today in Washington. The median forecast of 39 economists surveyed by Bloomberg News called for a 1.5 percent gain in May.
Record-low mortgage rates and cheaper properties may keep sparking buyer interest, even as cooling employment and limited access to credit remain hurdles for the market. The Federal Reserve’s decision last week to extend a program aimed at holding down borrowing costs may sustain the progress in residential real estate.
“This improvement adds to the recent flow of good news on the housing sector, reinforcing our view that this beleaguered sector is finally on the mend,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said in an e-mail to clients. “It points to a decent pop in existing-home sales activity in June.”
Estimates in the Bloomberg survey ranged from a drop of 1.6 percent to a rise of 6.8 percent.
Stocks extended gains after the housing figures, with the Standard & Poor’s 500 Index climbing 0.7 percent to 1,328.65 at 11:21 a.m. in New York. The S&P Supercomposite Homebuilding Index (S15HOME), which includes shares of PulteGroup Inc. and D.R. Horton Inc., gained 3.7 percent.
Another report today showed orders for durable goods climbed more than forecast in May, easing concern that U.S. manufacturing is faltering. Bookings rose 1.1 percent, the first gain in three months, the Commerce Department said.
Pending home sales provide insight into actual contract closings a month or two later. Purchases of existing homes, which made up about 93 percent of the housing market last year, are tabulated when the contract closes.
Today’s figures suggest sales of existing homes will rebound after a drop in May. Purchases declined 1.5 percent last month to a 4.55 million annual rate, the Realtors group said June 21.
Existing-home sales have climbed since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, sales reached a peak of 7.25 million in September 2005.
New dwellings accounted for almost 7 percent of the market last year, down from a high of 15 percent during the boom of the past decade. Sales of new homes climbed 7.6 percent to a 369,000 annual rate in May, a Commerce Department report showed June 25.
Compared with a year earlier, May pending sales of previously owned properties climbed 15.3 percent after a 14.7 percent surge in April.
Contract signings climbed in all four regions, today’s report showed, including a 14.5 percent jump in the West and a 6.3 percent gain the Midwest.
A decline in transactions involving foreclosures and short sales, where a lender agrees to accept less than the balance of the mortgage, helped push up the median price of a previously owned house up 7.9 percent from the same time last year, the biggest 12-month gain since February 2006, last week’s data showed.
Low borrowing costs continue to attract buyers. The average rate on a 30-year fixed mortgage dropped last week to 3.66 percent, the lowest since Freddie Mac record-keeping began in 1972.
Builders like Lennar Corp. (LEN:US) are seeing improvement in the housing market. The third-largest homebuilder by revenue said today that net income for the three months through May rose to $452.7 million, or $2.06 a share, from $13.8 million, or 7 cents, a year earlier.
“Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Chief Executive Officer Stuart Miller said in the statement.
Orders at the company climbed to 4,481 homes from 3,204 a year earlier. The Miami-based builder’s backlog jumped 61 percent.
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