Posted on 23 Jul 2009
Home resales in the U.S. rose in June for a third consecutive month, spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices.
Purchases climbed 3.6 percent to an annual rate of 4.89 million, stronger than forecast and the highest level since October, the National Association of Realtors said today in Washington. Median prices fell 15 percent.
The gain in sales confirms Federal Reserve Chairman Ben S. Bernanke’s remarks this week that the worst housing slump in eight decades appears to be moderating. A record drop in household wealth, due in part to the plunge in property values, and mounting unemployment are among the reasons rebounds in housing and the economy are likely to be drawn out.
“We have finally bottomed out,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. Improved affordability “is stalemating the drag from higher unemployment.” Hoffman forecast sales would rise to a 4.9 million pace.
Economists forecast existing sales would rise to a 4.84 million rate from a previously reported 4.77 million for May, according to the median of 68 projections in a Bloomberg News survey. Estimates ranged from 4.7 million to 5 million.
The Labor Department earlier today reported that first-time applications for jobless benefits climbed by 30,000 to 554,000 in the week ended July 18. The number of workers filing claims had dropped by 93,000 over the previous two weeks, reflecting changes in the timing of mid-year auto shutdowns to retool for the new-model year.
June traditionally is one of the top sales months of the year as families prepare to move before the start of the next school term, according to the NAR. The group adjusts the figures for these seasonal variations in order to facilitate month-to- month comparisons.
Sales were down 0.2 percent compared with a year earlier.
The gain last month was based by a 14 percent jump in purchases of condominiums. Sales of single-family houses increased 2.4 percent and were up o.2 percent from June 2008, the first year-over-year gain since September.
The number of houses on the market fell 0.7 percent to 3.82 million in June, NAR said. At the current sales pace, it would take 9.4 months to sell those homes, compared with 9.8 months in May. A 7 months supply is usually consistent with stabilization in prices, NAR chief economist Lawrence Yun, said in a press conference. It may take until the end of this year or early 2010 before property values steady, he said.
The median price of an existing home fell to $181,800 from $215,000 a year earlier, the NAR said.
Existing sales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. The median price reached a six-year low the same month, extending the decline from July 2006’s record to 28 percent.
Mounting foreclosures have accelerated the drop in prices. More than 1.5 million homeowners had their homes seized by banks or received default or auction notices in the first half of the year, a 15 percent increase from a year earlier and a record, Irvine, California-based RealtyTrac Inc. said July 16.
Fewer Distress Sales
The share of homes sold as foreclosures or otherwise distressed properties fell to 31 percent last month, Yun said. The share is “declining measurably” from the 45 percent to 50 percent level seen earlier this year, he said.
Falling property values have both helped and hurt demand. Some Americans who owe more on their mortgages than their homes are worth can’t sell their properties to trade up or to move to areas of the country where more jobs are available.
Seeking to stem the slump in sales and lower borrowing costs, Fed policy makers committed to a $1.25 trillion program to purchase securities backed by home loans. Those purchases, as well as direct government purchases of Treasuries, drove rates on 30-year mortgages to a record low 4.78 percent in April, according to figures from Freddie Mac. Rates have since gravitated above 5 percent.
In addition, the Obama administration’s stimulus plan provided an $8,000 tax credit for first-time home buyers for purchases completed before Dec. 1.
Growing joblessness may be diluting the effectiveness of these government efforts. With unemployment at a quarter-century high of 9.5 percent and forecast to rise further, more Americans may not be willing to make big-ticket purchases. Banks have also made it harder to obtain loans for those without good credit.
Wells Fargo & Co., the biggest U.S. home lender, yesterday said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. Assets no longer collecting interest climbed 45 percent as of June 30 from the first quarter, the San Francisco-based bank said.
Chief Financial Officer Howard Atkins said in an interview nonaccrual loans from its acquisition of Wachovia Corp. will moderate in the coming quarters.