Tags: Booming | Home | Sales | Highest

Booming Home Sales Likely to Hit Highest Since '09

Sunday, 21 Jul 2013 03:41 PM

 

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Home sales probably climbed in June to the highest level since November 2009, showing residential real estate is becoming a mainstay of U.S. economic growth.

Combined purchases of existing and new houses rose to a 5.74 million annualized pace last month, according to the median forecasts of economists in a Bloomberg survey. Other figures may show manufacturing is improving, eliminating a source of weakness for the expansion.

The housing gains will probably be sustained as would-be buyers with access to credit rush to lock in mortgage rates before they climb much more. The construction-industry rebound, combined with rising demand for autos, is contributing to a stabilizing in manufacturing that will help the world’s largest economy gain momentum in the second half of the year.

“The housing market is clearly recovering this year about as fast as you’d expect in a normal expansion,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. The rebound is “a big plus for June, July manufacturing,” along with improvement in the auto market, he said.

Sales of previously owned homes rose to 5.26 million annualized pace in June from 5.18 million the prior month, according to the median forecast of economists surveyed before the National Association of Realtors’ report tomorrow.

On July 24, Commerce Department data will show purchases of new homes increased to a 484,000 pace last month, the highest level since June 2008, according to the median forecast in the Bloomberg survey.

Growing Confidence

A report last week showed builder confidence rose in July to the highest level in seven years as companies grew more upbeat about sales prospects.

KB Home based in Los Angeles is among companies enjoying improving demand for housing.

“Housing dynamics are significantly better than they were a year ago,” Chief Executive Officer Jeffrey T. Mezger said in a June 27 earnings call. “We are still in the early innings of a recovery that is continuing to accelerate. The positive factors underpinning the current housing recovery remain fully in place and will continue to drive favorable market fundamentals.”

Speculation that the Federal Reserve is getting closer to paring its bond buying has caused mortgage rates to increase. The average rate on a 30-year fixed loan was at 4.37 percent in the third week of July, up from a record low of 3.31 percent in November, according to data from Freddie Mac.

Bernanke’s View

Fed Chairman Ben S. Bernanke tried to reassure markets during his two-day semi-annual testimony before Congress last week that the central bank is monitoring the situation.

“We will be watching to see if the movement in mortgage rates has any material effect on housing,” Bernanke said during questioning before the House Committee on Financial Services. “If we think that mortgage-rate increases are threatening that progress, then we would have to take additional action in the monetary sphere to try to address that.”

Builder shares have suffered over concern that the increase in borrowing costs will hurt demand. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Lennar Corp. and PulteGroup Inc., has slumped 15.7 percent since reaching a six-year high on May 14. The S&P 500 Index has climbed 2.5 percent over the same period.

Nonetheless, strength in the housing market has lent momentum to manufacturing, which is also being helped by a strong auto market.

Durable goods orders climbed 1 percent in June, a third consecutive gain, Commerce Department figures will show on July 25, based on the median projection of economists surveyed by Bloomberg. Orders excluding transportation gear, a category that is volatile from month to month, will advance 0.5 percent, matching the increase in May, economists said.

“Manufacturing expanded in most districts since the previous report, with many districts reporting increases in new orders, shipments, or production,” the Fed’s Beige Book, which is based on regional surveys of businesses, said last week.


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