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Business Title: Sales of U.S. Existing Homes Rose More Than Forecast May 24 (Bloomberg) -- Sales of U.S. previously owned homes rose in April to the highest level in five months as buyers took advantage of the last weeks of a government tax credit. Purchases increased 7.6 percent to a 5.77 million annual rate, figures from the National Association of Realtors showed today in Washington. Sales were the highest since November, the month the incentive was first due to expire. The median price climbed 4 percent from April 2009. Demand may hold up through next month as buyers who close on a deal by June 30 are still eligible for the administration’s credit worth up to $8,000. The recent drop in borrowing costs caused by concern that the European debt crisis will slow global growth may help underpin sales after the loss of government support in the second half of the year and the jobless rate hovers around 10 percent. “The housing market is moving in the right direct, but it’s going to be bumpy, specially as it’s being weaned off federal stimulus” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. Stocks held earlier losses after the report as bank borrowing costs in Europe rose on concern the region’s debt crisis has further to run. The Standard & Poor’s 500 Index fell 0.2 percent to 1,085.4 at 10:17 a.m. in New York. Treasury securities rose. Exceeds Median Existing home sales were forecast to rise to a 5.62 million rate, according to the median estimate of 71 economists in a Bloomberg News survey. Projections ranged from 5.4 million to 5.85 million after an initially reported 5.35 million rate in March. Purchases of existing homes climbed 26 percent compared with a year earlier prior to adjusting for seasonal patterns. The median price increased to $173,100 from $166,500 a year ago. The Obama administration extended a credit for first-time homebuyers in November and expanded it to include some current owners. The deadline for signing contracts was the end of April, and transactions must be completed by June 30. Sales of existing houses are tabulated at contract closings, meaning the tax credit can still influence demand through June. Rates for 30-year fixed mortgage loans fell to 4.84 percent in the week ended April 20, a fifth-month low, according to figures from Freddie Mac. Falling home-loan rates may help prevent the housing market from slipping after the expiration of the federal homebuyer tax credit. Inventories Surge The number of previously owned homes on the market jumped 12 percent to 4.04 million, the highest level since July, today’s report showed. At the current sales pace, it would take 8.4 months to sell those houses compared with 8.1 months at the end of the prior month. Even with the increase, sales were well short of the 6.49 million pace reached in November, showing the tax incentive lost some power after it was extended. The surge in inventory was larger than normal for this time of year and is not a “healthy” development, the NAR’s chief economist Lawrence Yun said in a press conference. The group cannot pinpoint what is driving the gain, he said. It’s either a release of pent up supply, in which case that implies there is also pent up demand, or it may be investors dumping properties on the market, which may hurt the market, Yun said. Influence on Prices The supply increase means there will be no “meaningful” increase in home prices this year or possibly next, Yun said. The share of homes sold to first-time buyers increased to 49 percent from 44 percent in March, Yun said, the Realtors’ group’s chief economist said, showing the influence of the tax incentive. Sales of existing single-family homes increased 7.4 percent to an annual rate of 5.05 million. Sales of multifamily properties, including condominiums and townhouses, rose 9.1 percent to a 720,000 pace. The Commerce Department may report in two days that new home sales, which are recorded at the time contracts are signed, rose 3.4 percent last month to a 425,000 rate, economists forecast. Reports last week showed builder confidence climbed in May to the highest level since August 2007 and housing starts in April reached the highest level since October 2008, signs the looming expiry of the credit was pulling demand forward. Building permits, a sign of future construction, fell in April by the most since December 2008, a sign homebuilding will pause after the credit expires. More Foreclosures Foreclosures may also influence the direction of the housing market after the tax incentive is over. Home foreclosures probably will reach a record this year with more than 1 million properties seized by banks, according to data seller RealtyTrac Inc. With a fifth of mortgaged homes worth less than their loans in the fourth quarter, it’s harder for Americans to move to find new jobs, one reason the jobless rate is close to a 26-year high. Unemployment was 9.9 percent in April, up from the prior month, according to the Labor Department, and economists surveyed by Bloomberg this month forecast the rate will end the year at 9.4 percent. Homebuilders continue to struggle. Pulte Group Inc., the largest U.S. homebuilder by revenue, said the number of houses it sold in the first quarter fell even after it combined operations with rival Centex Corp. “The U.S. housing industry is finding, and may have already found, a bottom, but that’s different from saying that a recovery is at hand,” Richard J. Dugas, the company’s chairman and chief executive officer, said on a conference call with analysts on May 5. “Even a modest uptick in employment could have a significant impact on demand, assuming it drives greater confidence.”
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