Sales of existing U.S. homes probably increased in December
By Alex Kowalski Bloomberg News
WASHINGTON - Sales of previously owned U.S. homes probably rose in December to the highest level in more than a year, a sign the housing market ended 2011 with momentum, economists said before a report Friday.
Purchases increased 5.2 percent last month to a 4.65 million annual rate, the most since May 2010, according to the median forecast of 75 economists surveyed by Bloomberg News.
Historically low mortgage rates and a pickup in employment may be giving Americans the confidence to purchase homes that have fallen in value. At the same time, another wave of foreclosures may inhibit a faster recovery in real estate as more distressed properties are put on the market.
“We should continue to see moderate housing market growth in 2012,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “The fundamentals are still weak for the market to recover by itself, but certainly there are some pockets of strength. Housing prices, though, will continue to decline.”
The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ sales estimates ranged from 4 million to 5 million following November’s 4.42 million pace.
Last month, the group revised down housing figures going back to 2007 by an average 14 percent, showing that the industry that helped spark the 18-month recession was a bigger drag on the U.S. economy than previously estimated.
The report also showed the inventory of unsold homes was reduced to 2.58 million as of November, the lowest level in more than six years. Barring a pickup in foreclosures, less supply of unsold properties may help stabilize home prices. The median price of an existing home in the U.S. fell 3.5 percent in November from a year earlier. The average year-over-year price decline in 2011 was 4.6 percent.
Sales, Traffic Rise
Homebuilders are growing more optimistic. The National Association of Home Builders/Wells Fargo sentiment index rose this month to the highest level since June 2007 as sales and buyer traffic improved.
The economy added 200,000 jobs in December and the unemployment rate declined to an almost three-year low of 8.5 percent, Labor Department figures showed earlier this month. Meantime, mortgage rates averaged a record-low 3.88 percent in the week ended Jan. 19, according to data by Freddie Mac.
“Consumers are beginning to realize that housing represents an undeniable value proposition, and accordingly demand is growing,” Stuart Miller, chief executive officer at Miami-based Lennar Corp., said on a Jan. 11 conference call. “As I look ahead to 2012, I’m cautiously optimistic that we’re seeing a real bottom form and that we will begin to see signs of recovery.”
Builder shares have responded. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has surged 56 percent since the end of the third quarter, compared with a 16 percent increase for the broader S&P 500 Index.
Nonetheless, Federal Reserve officials are concerned that “high unemployment and weak income growth have made it difficult for many households to purchase homes despite the large declines in house prices and mortgage rates,” policy makes said in a Jan. 5 report delivered to Congress. “Weak demand to purchase homes and the restricted supply of mortgages has put considerable downward pressure on house prices in many areas,” they said.
Streamlining the refinancing process, easing borrowing requirements to allow investors to buy single-family properties in bulk and modifying existing loans were among measures the central bank’s report proposed to assist the market.
“One of the questions that potential buyers or potential investors are looking at is how much inventory is there still to come on the market,” Fed Governor Elizabeth Duke said during a Jan. 16 speech. “Such low levels of sales” indicate “it’s still going to be a long time before the inventory backlog is worked through.”