WASHINGTON (Reuters) — Sales of existing homes rose in August to their highest rate in more than two years and new housing construction also climbed last month, providing signs that a budding housing market recovery is gaining traction.
The National Association of Realtors said Wednesday that existing home sales increased 7.8 percent last month to an annual rate of 4.82 million units. That was well above economists’ expectations and the fastest rate since May 2010 when activity was being supported by a homebuyer tax credit.
The American economy has grown at a lackluster pace this year and has struggled to create jobs, but the housing sector is a relative bright spot for the first time since the 2007-9 recession. “Housing is clearly in recovery mode,” said Jim O’Sullivan, chief United States economist at High Frequency Economics.
Prices for previously owned homes also rose when compared with a year earlier, a factor that could spur consumer spending by helping homeowners feel more confident about their finances. The median price nationwide for existing home resales rose 9.5 percent, to $187,400, the association said.
The Federal Reserve is trying to help housing build more momentum, and last week it started a program to buy tens of billions of dollars in mortgage-backed securities, a move that could push interest rates lower for both new and refinanced mortgages.
Many economists expect construction of new homes will contribute to economic growth this year for the first time since 2005, and a separate report from the Commerce Department buttressed that view. Builders broke ground on new homes at an annual rate of 750,000 units last month, an increase of 2.3 percent, the department said.
“Today’s data are another indication of improvement in the U.S. housing market,” said Andrew Grantham, an economist at CIBC World Markets.
Still, housing starts fell short of expectations as groundbreaking on multifamily home projects fell and July’s pace was revised downward. At the same time, building permits slipped 1 percent.
Home sales have been creeping up and the steep decline in prices since 2006 appears to have bottomed. That has helped homebuilder sentiment, which this month touched a six-year high.
The National Association of Realtors said the share of so-called distressed sales — which include foreclosures and sales in which the owner owes more on a home than it is worth — fell last month, a factor that probably contributed to the rise in prices.
Distressed sales tend to go with a heavy discount, and the share of existing home resales in those conditions dropped to 22 percent last month, down from 24 percent in July. In August 2011 the distressed sales rate was 31 percent.
The nation’s inventory of existing homes — those for sale on the market — rose 2.9 percent during the month to 2.47 million. But at August’s sales pace, that would supply the market for only 6.1 months, down from 6.4 months in July.
Although the Federal Reserve is moving to keep mortgage rates low, it may have limited success in bolstering the housing market. Part of the reason is that lending standards for mortgages have tightened significantly since before the recession.
”While rates are at historical lows, borrowers still have a very difficult time accessing the mortgage markets,” said John Tashjian, principal at Centurion Real Estate Partners.
Last week, the average interest rate for a fixed 30-year mortgage fell 3 basis points, or three-hundredths of a percentage point, to 3.72 percent, the Mortgage Bankers Association said.
Please login to add to favorites
Already added to favorites
Added as Favorite