Home Sales Probably Rose Toward 2009 High
MAY 20, 2013 10:45am ET
Home sales probably rose in April to the highest level in more than three years, extending gains in residential real estate that are giving the U.S. expansion a lift, economists said before reports this week.
Combined purchases of new and existing residences climbed to a 5.41 million annualized rate last month, the highest since November 2009, according to the median forecast of economists surveyed by Bloomberg ahead of figures from the National Association of Realtors and the Commerce Department. Other data may show orders to manufacturers improved after slumping in March by the most in seven months.
Housing is a source of strength as borrowing costs near record lows and increasing employment help rebuild confidence, spur demand, stabilize prices and boost household wealth. Federal Reserve Chairman Ben Bernanke, who will testify before Congress this week on the economic outlook, can point to the real estate rebound as evidence that policy makers’ efforts are gaining traction even as areas such as manufacturing cool.
“Housing is a very clear bright spot,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, N.C. “It’s probably going to be a nice tailwind for us for the foreseeable future.”
The central bank is helping boost the housing market with $40 billion a month in mortgage bond purchasing that is helping hold down mortgage rates.
Bernanke will testify before the Joint Economic Committee on May 22, and may provide clues as to whether he sees the Fed making enough progress toward its goal of substantial improvement in the labor market to warrant reducing stimulus.
Minutes of Fed policy makers’ two-day meeting that ended May 1, in which officials said they were prepared to raise or lower bond purchases as dictated by economic conditions, will be out the same day.
The projected pace of total home sales last month would be the highest since a tax credit for first-time homebuyers first expired in November 2009. It would be the third-highest since August 2007, four months before the start of the last recession.
Purchases of previously owned homes climbed to a 4.98 million annualized rate in April, also the highest since November 2009, according to economists’ projections. The National Association of Realtors’ report is due May 22.
Sales of newly built houses picked up to a 425,000 annualized rate, a three-month high, according to the median forecast in a Bloomberg survey of economists ahead of a May 23 report from the Commerce Department.
“Housing has got the wind at its back,” said Jonathan Basile, a U.S. economist at Credit Suisse Holdings USA in New York. “It makes you wonder how much longer does the Fed really have to keep the training wheels on the housing market.”
Building permits increased 14.3% to a 1.02 million annualized rate in April, the highest level since June 2008, the Commerce Department reported last week, as builders looked to redress the low number of homes on the market.
The growth has increased demand for lumber and other supplies, leading to shortages in some areas, according to a survey from the National Association of Homebuilders last week.
Suppliers including Weyerhaeuser Co. and Associated Materials LLC are seeing increased demand for building materials. As more jobs are created, more people are forming households and buying properties, Weyerhaeuser economist Don Haid said.
“Growth in the housing sector is helping energize the overall economy,” Haid said at a May 10 conference. “Inventories are way down and that’s energized prices. We’ve seen significant upward movement in both new and existing home prices.”
Construction company shares are benefiting from the rebound in housing. The 11-member Standard & Poor’s Supercomposite Homebuilding Index, which includes Lennar Corp. and PulteGroup Inc., has climbed 23.5 percent so far this year. By comparison, the broader S&P 500 Index is up 16.9%.
Gains in construction are giving a lift to factories that may limit the damage to manufacturing from weaker global demand and federal budget cuts.
Reports last week showed manufacturing unexpectedly contracted in May in the regions covered by the Federal Reserve Banks of Philadelphia and New York. Industrial production declined 0.5% in April, the most in eight months, according to other Fed figures.