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Business Title: Sales of U.S. Existing Homes Climb to a Two-Year High Sales of existing homes rose more than forecast in August to a two-year high, an additional sign the U.S. housing market is gaining traction in the second half of the year. Purchases of previously owned 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. Another report showed construction began on more single-family homes last month than at any time in the past two years. Benefitting from record-low mortgage rates, more affordable properties and a growing population, the U.S. housing market is starting to climb out of a multiyear slump. Nonetheless, unemployment and tight lending conditions may impede a quicker return to the 5 million to 5.5 million sales pace that the real- estate agents group says constitutes a “normal” market. “The nascent housing recovery has deepened,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, who projected 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.” Shares rose after the report showed the housing market was continuing to recover. The Standard & Poor’s 500 Index advanced 0.1 percent to 1,461.35 at 10:28 a.m. in New York. Estimates in the Bloomberg survey ranged from 4.45 million to 4.85 million. The prior month’s pace was unrevised at 4.47 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. 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. Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 22 percent of the total, the lowest since at least October 2008 when record keeping began, Yun said. “The housing-market recovery is becoming much more convincing,” Yun said in the press conference. He projected that the pace of sales would reach a five-year high in 2012. The number of previously owned homes on the market increased 2.9 percent to 2.47 million. At the current sales pace it would take 6.1 months to sell those houses, the fewest since January, compared with 6.4 months at the end of the prior month. Supply in the six-months range is “normal,” the group has said. Of all purchases, cash transactions accounted for about 27 percent, said Yun, almost three times the 10 percent this is typical. First-time buyers made up 31 percent of the total compared with the average of 40 percent to 45 percent seen in normal years, said Yun. Sales of existing single-family homes increased 8 percent from the prior month to an annual rate of 4.3 million. Purchases of multifamily properties including condominiums and townhouses climbed 6.1 percent to a 520,000 pace. Sales improved in all four regions, led by an 8.6 percent advance in the Northeast. Demand increased 8.3 percent in the West, 7.7 percent in the Midwest and 7.3 percent in the South. Multiple measures show the housing market is healing. 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. Home values are on the rise, which 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.” “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. Construction companies too are noting better business conditions. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in September to the highest level since June 2006. “The housing market and the consumer, our customer, is really probably on a pretty good firm foundation,” Rob Lynch, president and chief executive officer of Lumber Liquidators Holdings Inc. (LL), said during a Sept. 6 conference. “We see things probably maintaining and-or slightly improving.” Work began on 5.5 percent more single-family houses in August, taking starts to a 535,000 annual rate, the fastest since April 2010, figures from the Commerce Department also showed today. Permits for the building of one-family homes increased 0.2 percent to a 512,000 annual pace, the highest since March 2010. Total housing starts climbed 2.3 percent to a 750,000 annual rate, less than forecast and restrained by a drop in the building of apartments, the data showed. At the same time, potential buyers may not find it easier make a purchase by securing a loan. Of the 60 senior loan officers surveyed by the Fed in July, only one said lending standards were easier for any type of mortgage compared with 2005.
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