Sales of previously owned homes rose more than forecast in November to reach a three-year high as lower borrowing costs sustained the U.S. housing rebound.
Purchases of existing houses increased 5.9 percent to a 5.04 million annual rate, the most since November 2009, the National Association of Realtors reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg projected an increase to a 4.9 million rate. Property values climbed 10.1 percent over the past 12 months as inventories dropped to the lowest level in 11 years.
Record-low mortgage rates and an improved job market are boosting sales and cutting inventories, giving the market the opportunity to absorb foreclosures. Prices are rising as a result, which will probably draw more buyers seeking to take advantage of current affordability in housing, helping retailers such as Pier 1 Imports Inc. (PIR:US) and Lowe’s Cos. Inc.
“The housing market is staged for continued improvement,” Anika Khan, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, before the report. “Underlying fundamentals are continuing to improve despite uncertainty. We’re seeing better labor market numbers, and that’s also reflected in better consumer confidence. Sales activity is going to be volatile but the underlying trend is still improving.”
Economists’ estimates in the Bloomberg survey ranged from 4.59 million to 5.15 million. The prior month’s pace was revised to 4.76 million from a previously reported 4.79 million.
Other reports today showed the economy grew at a faster pace than projected in the third quarter, claims for jobless benefits increased last week and consumer confidence climbed to an eight-month high.
The economy grew at a 3.1 percent annual rate in the third quarter, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap, figures from the Commerce Department showed.
The number of Americans filing first-time claims for unemployment insurance payments increased by 17,000 to 361,000 in the week ended Dec. 15, according to Labor Department data. It was the first increase in five weeks.
The Bloomberg Consumer Comfort Index rose to minus 31.9 in the period ended Dec. 16, from minus 34.5 in the prior week. The gauge was within a half point of a four-year high reached in April. Americans views’ on the economy and personal finances improved as gains in employment, a rebound in housing and lower gasoline prices are giving households reason to be upbeat during the holiday-shopping season.
Today’s report on existing home sales showed the median price increased to $180,600 from $164,000 in November 2011, today’s report showed. The increase reflects a growing share of sales of higher-priced properties, Lawrence Yun, NAR chief economist, said in a news conference as the figures were released.
Compared with a year earlier, purchases increased 15.5 percent before adjusting for seasonal variations.
The number of previously owned homes on the market dropped to 2.03 million, the fewest since December 2001. At the current sales pace, it would take 4.8 months to sell those houses, the lowest since September 2005, compared with 5.3 months at the end of October.
Existing-home sales have improved after reaching a low 3.39 million annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.
Efforts by Federal Reserve policy makers to boost growth by keeping interest rates low are paying off. The average rate on a 30-year, fixed loan was 3.32 percent last week, compared to 3.94 percent a year ago, according to Freddie Mac. The rate reached 3.31 percent in late November, the lowest in weekly data back to 1972.
Builders are planning on increasing the supply of new houses, with the number of building permits issued in November hitting a four-year high, the Commerce Department reported yesterday. Applications, a proxy for future construction, rose 3.6 percent to an 899,000 annual rate, the most since July 2008.
Consumer confidence is improving and shoppers are spending, partly because of housing-market gains, said Robert Hull, chief financial officer at Lowe’s, based in Mooresville, North Carolina.
“2012 represents the first year of growth across all of the core housing metrics: housing turnover, single-family starts and median home prices,” Hull said at a Dec. 5 investor conference. “These recent positive trends are helping consumers regain confidence in both their local housing markets and their home value.”
Pier 1’s furniture sales have been gaining momentum all year, President and Chief Executive Officer Alexander Smith said. On Dec 13, the company reported its 13th consecutive quarter of sales and profit growth.
The improvement is due in part to “what we view as the very beginnings of a long-awaited recovery in the housing market,” Smith said on an earnings call.
To contact the reporter on this story: Lorraine Woellert in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Christopher Wellisz at email@example.com