Sales of previously owned homes jumped in March by the most in four years, putting the U.S. residential real estate market on firm footing heading into the busiest time of year.
Purchases increased 6.1 percent to a 5.19 million annualized rate, the highest level since September 2013, figures from the National Association of Realtors showed Wednesday in Washington. Houses were snapped up in 52 days on average, the fastest since July, and property values appreciated.
“It’s consistent with a bit of a spring rebound,” said Gennadiy Goldberg, a strategist at TD Securities LLC in New York, whose forecast for a sales rate of 5.2 million was the closest in the Bloomberg survey. “You’ve had more job growth over the last year or so. A lot of those people who did find employment would be driving some demand for housing.”
The share of first-time buyers inched up while distressed properties were a smaller part of the market, indicating a healthier mix in demand leading up to the May through July period when sales typically surge. While the number of homes for sale rose in March for a second month, more listings of cheaper properties would help provide another leg up for housing.
The gain in March was the biggest since December 2010. Figures from the Mortgage Bankers Association on Wednesday showed stronger demand is extending into April. The group’s index of purchase applications climbed last week to the highest level since June 2013.
Stocks rose toward all-time highs and Treasuries fell for a third day. The Standard & Poor’s 500 Index advanced 0.5 percent to 2,107.96, within 12 points of a record high. The yield on 10-year notes rose seven basis points, 0.07 percentage point, to 1.98 percent at 4:24 p.m. in New York.
Housing Inventory
While a lean supply of properties for sale has been a hurdle for housing, an increase in inventory last month indicates sellers are confident buyers will emerge as the weather warms. The Realtors group said that 40 percent of homes sold in March were on the market for less than a month.
The number of existing properties for sale rose 5.3 percent to 2 million in March from a month earlier, according to the NAR. At the current pace, it would take 4.6 months to sell those houses compared with 4.7 months at the end of February.
“For inventories, the trajectory of home prices will be a key driver in the decision for an owner to put their home on the market,” Wells Fargo Securities LLC economists Mark Vitner and Anika Khan wrote in a note to clients.
The median price of an existing home surged 7.8 percent from a year ago, the most since February 2014, to $212,100. Figures Wednesday from the Federal Housing Finance Agency showed the cost of a purchased house was 5.4 percent higher in February from the same time last year, matching the biggest gain since May.
Supply Needed
“Housing is recovering but home prices are rising too fast,” Lawrence Yun, NAR chief economist, said in a news conference as the figures were released. “The only way to relieve housing cost pressure is to have more supply coming onto the market.”
An increase in supply of new homes, particularly for Americans at the lower end of the income scale, would help, Yun said. Data last week from the Commerce Department showed builders are in little rush. Housing starts rose less than forecast last month following a February pace that was the weakest in more than a year.
Estimates in the Bloomberg survey of 80 economists for existing-home sales ranged from rates of 4.85 million to 5.2 million. February’s pace was revised to 4.89 million from a previously reported 4.88 million.
Purchases increased in all four U.S. regions, led by a 10.1 percent gain in the Midwest. They were up 6.9 percent in the Northeast, 6.3 percent in the West and 3.8 percent in the South.
One-Family Homes
Sales of single-family homes increased 5.5 percent to an annual rate of 4.59 million, the most since August 2013, while closings on multifamily properties including condominiums advanced 11.1 percent.
Meanwhile, a smaller share of short sales and foreclosures is creating more opportunity for other sellers. Purchases of distressed properties accounted for 10 percent of the total, down from 11 percent a month earlier.
The housing market had been struggling to gain momentum in recent months as rising property values limit purchases by those who are more sensitive to prices, such as young adults and low-income Americans. Federal regulators late last year adjusted mortgage rules to reduce risks for lenders and cut premiums and down payments for lower-income borrowers.
A slowdown of home buying by investors has also created an opening for those looking to make their first-ever purchase. First-time buyers accounted for 30 percent of all purchases in March, up from 29 percent a month earlier, the NAR’s report showed.
Builders Upbeat
Homebuilders are confident better times are ahead. The National Association of Home Builders/Wells Fargo sentiment gauge rose in April to a three-month high amid improved buyer traffic and a better sales outlook. Lenders are also upbeat.
“Interest rates remain low, homes are affordable, consumer and small business confidence remains high, and the labor market is approaching full employment,” John Stumpf, chief executive officer at Wells Fargo & Co., the nation’s largest home lender, said on an April 14 earnings call.
As the Federal Reserve considers raising interest rates for the first time since 2006, the prospect of higher borrowing costs may persuade those who are hesitant to take the plunge. The average rate for a 30-year fixed mortgage was 3.67 percent in the week ended April 16, according to Freddie Mac in McLean, Virginia. The rate was 3.59 percent in February, the lowest in almost two years.
