Sales of U.S. Existing Homes Climb to a Two-Year High

Sales of previously owned homes and work on single-family projects climbed in August to the highest levels in two years, signaling the residential real-estate market is contributing to the U.S. economic recovery.

Purchases of existing houses increased 7.8 percent to a 4.82 million annual rate, the most since May 2010, figures from the National Association of Realtors showed today in Washington. The median forecast of 78 economists surveyed by Bloomberg called for sales to increase to a 4.56 million pace. Commerce Department data showed builders began work on the most one- family homes since April 2010.

Record-low mortgage rates, more affordable properties and limited supply of new homes are driving orders at builders such as Toll Brothers Inc. (TOL) and Hovnanian Enterprises Inc. (HOV) In addition, sales of distressed properties are starting to account for a smaller share of the market, leading to gains in home values that are laying the groundwork for a sustained economic expansion as household sentiment and finances improve. 

“The nascent housing recovery has deepened,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, who projected existing-home sales would climb to a 4.85 million rate. “Ultimately, this improvement will lead to a rise in residential wealth, which tends to lift consumer confidence and spending.”

The Standard & Poor’s Supercomposite Homebuilders Index (S15HOME) rose 3.8 percent at 12:56 p.m. in New York, while the S&P 500 gained 0.3 percent. The pickup in housing helps explain why the index of builder shares, including PulteGroup Inc. and D.R. Horton Inc., has surged 77 percent this year through yesterday, outpacing a 16 percent gain in the broader S&P 500.

Builder Shares

Construction of single-family houses climbed 5.5 percent to a 535,000 rate, the fastest since April 2010, after a 4.5 percent decrease, the Commerce Department said today in Washington. Permits for the building of one-family homes increased 0.2 percent to a 512,000 annual pace, the highest since March 2010.
Beginning construction of all homes rose 2.3 percent to a 750,000 annual rate in August, less than forecast and restrained by a decrease in starts of multifamily dwellings that are volatile month to month.
Work on apartments and other multifamily homes dropped 4.9 percent to an annual rate of 215,000.

Beyond Builders

The housing rebound extends beyond builders -- from home- furnishings retailers like Lowe’s Cos. and Home Depot Inc. to building materials supplies such as gypsum wallboard-maker USG Corp. 

Existing-home sales have improved after reaching a low of a 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.
Estimates in the Bloomberg survey for August ranged from 4.45 million to 4.85 million. Compared with a year earlier, purchases increased 11 percent in August, today’s report showed. 

The median price of an existing home climbed 9.5 percent to $187,400 from $171,200 in August 2011. Prices have increased in each of the past six months on a year-to-year basis, the best performance since early 2006.
The increase in prices reflects both a reduction in distressed sales and a “genuine” appreciation in property values, Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released.

Home Prices

The gain in home values may induce potential buyers and sellers to enter the market. Prices last quarter posted their first year-over-year gain since 2007, according to Zillow Inc., the Seattle-based operator of the largest real-estate information website.

Higher real estate values also helped more than 1.3 million homeowners regain equity in the first six months of 2012, according to CoreLogic. About 22.3 percent of homeowners with a mortgage owed more than their homes were worth at the end of June, down from 23.7 percent three months earlier. 

Even with pricier real estate, homes remain affordable. The average rate on a 30-year fixed mortgage was at 3.55 percent in the week ended Sept. 13, near 3.49 percent, the lowest since records began in 1971, Freddie Mac data show.

The Federal Reserve has also committed to purchasing $40 billion of mortgage debt a month to lower borrowing costs, helping the housing market that Chairman Ben S. Bernanke called “one of the missing pistons in the engine.”

Fed’s Bernanke

“Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing,” Bernanke said in a Sept. 13 press conference after the central bank announced the debt-buying plans. 

Homebuilders such as Red Bank, New Jersey-based Hovnanian Enterprises Inc. and Toll Brothers are seeing increased demand.
“Due to the industry’s rebound and our increase in sales pace, our communities are selling out more quickly and literally caught us without being able to replenish as fast as we’d like,” Ara K. Hovnanian, the company’s chairman, president and chief executive officer, said on a Sept. 6 earnings call. 

Toll Brothers, the largest U.S. luxury-home builder, reported a better-than-estimated profit and an increase in revenue for its third quarter ended July 31. The average price of the homes that the Horsham, Pennsylvania-based company delivered in the quarter climbed to $576,000 from $557,000 in the previous three months. 

“The housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes,” Chief Executive Officer Douglas Yearley Jr. said on an Aug. 22 conference call with investors. “With an industry wide shortage of inventory in many markets, we are enjoying some pricing power.”
 

3:25

Sept. 19 (Bloomberg) -- New housing construction rose in August, boosted by the strongest pace of single-family home starts in more than two years that shows an improving real estate market. Beginning construction climbed 2.3 percent to a 750,000 annual rate, less than forecast and restrained by a drop in the building of apartments, from a revised 733,000 annual pace in July, Commerce Department figures showed today in Washington. Betty Liu, Dominic Chu and Michael McKee report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

2:48

Sept. 19 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, discusses U.S. housing starts and existing-home sales for August data released today. (Source: Bloomberg)

Purchases of existing houses increased 7.8 percent to a 4.82 million annual rate, the most since May 2010, figures from the National Association of Realtors showed today in Washington. The median forecast of 78 economists surveyed by Bloomberg called for sales to increase to a 4.56 million pace. Commerce Department data showed builders began work on the most one- family homes since April 2010.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net; Michelle Jamrisko in Washington at mjamrisko@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Encouraging reports about housing lift stocks

NEW YORK -- A pair of encouraging reports about the housing market pushed U.S. stocks back above four-year closing highs Wednesday.

Home sales jumped to the highest level in more than two years in August, the National Association of Realtors said. Sales rose 7.8 percent to a seasonally adjusted annual rate of 4.82 million, the most since May 2010.

Earlier, the government had reported that construction of single-family homes in August also was the fastest in more than two years.

Stocks of homebuilders, already up after the construction report, rose sharply after 10 a.m., when the jump in home sales was reported. D.R. Horton Inc. rose 86 cents, or 4 percent, to $22.21; Beazer Homes USA Inc. rose 22 cents, or 6 percent, to $3.75; and KB Home rose 39 cents, or 3 percent, to $13.09.

The gains for broader stock indexes were muted. At its high for the day, the Dow Jones industrial average was up just 62 points. Still, the index was on track for its highest close since December 2007, the start of the Great Recession.

The housing numbers "are fantastic news," but traders continue to worry about recent discouraging signals this week like downgrades of railroads and a warning from Federal Express that the global economy is slowing, said JJ Kinahan, chief derivatives strategist for TD Ameritrade, a retail brokerage.

"The market is at a bit of a conundrum," Kinahan said. "There are just constantly these mixed signals about what's going on."

The Dow rose 39 points to 13,603 as of 2:15 p.m. EDT. If the gain holds, it will be the Dow's highest close since Dec. 10, 2007, when it finished at 13,727. The Dow is just a 4 percent rally shy of its all-time high of 14,164, reached Oct. 9, 2007.

The Standard & Poor's 500 index gained three to 1,462, which would also be good for a four-year closing high. Telecom and consumer discretionary stocks added the most among the industry groups in the S&P 500 index.

The Nasdaq composite index rose six to 3,183.
Earlier, Asian and European markets closed higher after the Bank of Japan announced a massive asset purchasing plan similar to what the Federal Reserve approved last week. Japan's main stock index hit a four-month high.

The yield on the 10-year Treasury note fell to 1.78 percent from 1.81 percent late Tuesday as demand for safe investments increased. A bond's yield falls as its price rises.
In corporate news, Cracker Barrel leapt $4.99, or 8 percent, to $68.61 after the purveyor of country cooking and homespun curios said it doubled its net income in the fiscal fourth quarter.
General Mills rose 81 cents, or 2 percent, to $40.12 after saying its fiscal first-quarter net income increased 35 percent because of yogurt sales overseas.

AutoZone Inc. jumped $10.51, or 3 percent, to $368.35 after saying its fiscal fourth-quarter net income rose 7.4 percent on strong sales at new stores.

Daniel Wagner can be reached at http://www.twitter.com/wagnerreports.

 

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Housing Recovery is Real.

US home sales jump to highest since May 2010

WASHINGTON (AP) — A jump in sales of previously occupied homes and further gains in home construction suggest the U.S. housing recovery is gaining momentum.

Sales of previously occupied homes rose 7.8 percent in August from July to a seasonally adjusted annual rate of 4.82 million, the National Association of Realtors said Wednesday. That's the highest level since May 2010, when sales were aided by a federal home-buying tax credit.

At the same time, builders broke ground on 2.3 percent more homes and apartments in August than July. The Commerce Department said the annual rate of construction rose to a seasonally adjusted 750,000. The increase was driven the best rate of single-family home construction since April 2010.

The pair of reports comes amid other signs of steady progress in the housing market after years of stagnation. New-home sales are up, builder confidence is at its highest level in more than six years and increases in home prices appear to be sustainable.

"The U.S. housing recovery is for real," said Sal Guatieri, an economist at BMO Capital Markets, in a note to clients. "Great affordability, pent-up demand and strong investor interest in rental units are driving the market."

The broader economy is also likely to benefit. When home prices rise, Americans typically feel wealthier and spend more. Consumer spending drives 70 percent of the economic growth.
And the Federal Reserve's plan to spend $40 billion a month on mortgage-backed securities to keep mortgage rates low "can only help," Guatieri added.

Still, home sales and housing starts are rising from depressed levels. Sales of previously occupied homes remain below the more than 5.5 million that economists consider consistent with a healthy market.

The number of first-time homebuyers, who are critical to a housing rebound, slipped to 31 percent from 34 percent. In a typical market, that figure is usually closer to 40 percent. Strict credit standards are making it harder for many first-time buyers to qualify for mortgages.
More Americans appear to be taking advantage of near-record low mortgage rates and prices that are, on average, much lower than they were six years ago.

Sales might be higher if more homes were available, the Realtors' group said. The limited supply is helping to lift prices. There were 2.47 million homes available for sale in August. It would take just over six months to exhaust that supply at the current sales pace. That's the typical pace in a healthy market.

Homes are selling more quickly than a year ago. The median amount of time that a home spent on the market was 70 days in August, the Realtors' group said. A year ago, the median timeframe was 92 days a year ago.

The median home price dipped in August to $187,400, but that is 9.5 percent higher than August 2011. That's the largest year-over-year price increase since January 2006.
One reason for the price gain is that sales of foreclosed homes and so-called short sales have declined. A short sale is when the seller owes more on the mortgage than the home is worth. Both foreclosure and short sales occur at steep discounts and can drag down overall home prices.

The lower supply of homes has boosted demand for new homes, which has made builders more confident in future sales.

Applications for building permits, a good sign of future construction, dipped in August to an annual rate of 803,000. Still, permits reached a four-year high of 811,000 in July, which was revised higher.

"Since builders are not taking out permits because it is fun to visit their local government office and pay fees, we can conclude that there should be a solid rise in construction in the months to come," said Joel Naroff, chief economist for Naroff Economics Advisors.

Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said home construction should add about 0.3 percentage point to overall economic growth this year.

"Housing is clearly in recovery mode," Sullivan said.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713 NMLS#4256

Visit FirstCapital Online or call: 310-458-0010