Sales of existing homes rise for first time this year

Sales of previously owned U.S. homes rose in April for the first time this year as the weather warmed, price increases slowed and more properties were put on the market.

Closings, which usually take place a month or two after a contract is signed, increased 1.3 percent to a 4.65 million annual rate, the National Association of Realtors reported Thursday in Washington. Economists surveyed by Bloomberg projected a 4.69 million pace. The number of homes for sale jumped 16.8 percent in April.

Easier lending standards for some Americans, faster job growth and historically low mortgage rates helped stabilize the industry at the start of the spring selling season. A pickup in construction that boosts housing inventory and tempers gains in property values would provide a further boost to the market.

“The improvement in availability suggests stronger sales activity in the months ahead,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of existing home sales in the last two years, according to data compiled by Bloomberg. Still, “we need to see more building activity.”

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Estimates in the Bloomberg survey of 75 economists ranged from 4.6 million to 4.82 million.

Stocks held gains after the figures. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,890.81 at 10:21 a.m. in New York.

Another report on Thursday showed the number of Americans filing applications for unemployment benefits increased more than forecast last week. Jobless claims increased by 28,000 to 326,000 in the week ended May 17.

Median prices

The median price of an existing home rose 5.2 percent from April 2013 to $201,700, Thursday’s report showed. The year-over-year increase was the smallest since March 2012.

The number of previously owned homes on the market rose to 2.29 million. At the current sales pace, it would take 5.9 months to sell those houses, the highest since August 2012, compared with 5.1 months at the end of the prior month. Less than a five months’ supply is considered a tight market, the Realtors group has said.

The sales increase in April “is welcoming,” Lawrence Yun, NAR chief economist, told reporters as the figures were released. “I feel optimistic you would trend higher generally. Now with more inventory, I think there will be more buyers entering the market.”

A pickup in housing construction will help to further alleviate inventory constraints, while higher rental prices may persuade more Americans to purchase properties, Yun said.

Cash purchases

At the same time, investors accounted for 18 percent of the home purchases last month, up from 17 percent a month earlier. Seven of 10 investors paid cash. Those transactions accounted for about 32 percent, about the same share as the last year, the report showed. First-time buyers represented 29 percent of all transactions.

Compared with a year earlier, purchases decreased 7.3 percent on an unadjusted basis.

Sales of existing single-family homes increased 0.5 percent to an annual rate of 4.06 million. Purchases of multifamily properties – including condominiums and townhouses – jumped 7.3 percent to a 590,000 pace.

Sales rose in the West and South. They declined in the Midwest and were unchanged in the Northeast.

Distressed sales

Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 15 percent of the total.

Even with the increase last month, the real-estate market has shown signs of strain since the middle of last year as higher borrowing costs and home prices put home ownership out of reach for some Americans.

Existing-home sales have declined since a recent high of 5.38 million in July 2013. Residential construction hasn’t contributed to economic growth the last two quarters, according to Commerce Department statistics.

Lower limits on loans guaranteed by the Federal Housing Administration and a plunge in distressed sales have also taken a toll.

The average rate on a 30-year, fixed mortgage was 4.14 percent in the week ended Thursday, compared with 3.51 percent a year ago, according to Freddie Mac in McLean, Va. At the same time, borrowing costs have declined since the start of the year when the average rate was 4.53 percent.

Home improvement

Home-improvement retailers Home Depot Inc. and Lowe’s Cos. are sticking to forecasts for improved sales this year after demand cooled at the start of the year because of harsh weather.

While the long winter held receipts at Lowe’s established stores to a 0.9 percent gain in the quarter ended May 2, trailing the 5 percent increase analysts estimated, the Mooresville, N.C.-based company maintained its forecast that revenue by that measure would advance 4 percent this year.

“Performance has improved in May which, together with our strengthening execution, gives us confidence to reaffirm our sales and operating profit outlook for the year,” Robert Niblock, CEO of the second-largest U.S. home-improvement retailer, said in a statement.

Home Depot, the largest home-improvement retailer, reported somewhat similar results on Wednesday. While first-quarter sales and profit trailed analysts’ estimates, ending six straight years of exceeding or meeting projections, the chain reiterated its forecast that revenue would gain 4.8 percent this year and boosted its projection for profit.

“The harsh winter weather placed a number of challenges on our supply chain,” Chief Financial Officer Carol Tome said on an earnings call earlier this week. “May sales are robust.”

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