Housing market recovery gains traction
WASHINGTON (Reuters) - The U.S. spring home-selling season got off to a strong start in April, with rising sales and prices providing evidence that a housing market recovery was gaining some traction.
The housing sector has been the Achilles' heel of the economy ever since the home-price bubble burst. Data this week, however, has painted a relatively upbeat picture for the market and underscored the economy's resilience.
"The recent buoyancy in housing market activity has raised hopes that this beleaguered sector may finally be on the verge of a rebound," said Millan Mulraine, senior macro strategist at TD Securities in New York.
New home sales increased 3.3 percent to a seasonally adjusted 343,000-unit annual rate, the Commerce Department said on Wednesday. Compared with April last year, sales were up 9.9 percent.
The report came on the heels of news on Tuesday that home resales hit a two-year high, with the sector getting support from investors who are increasingly seeing value.
Even more encouraging, the median price for both new and previously owned homes surged last month, a further sign of life for a market that has struggled to come back from its 2006 collapse.
The improving tone could be a boon for President Barack Obama, whose housing policies have been decried by critics for doing too little to help distressed homeowners.
Rising home prices could help households repair their finances, which were shattered when the housing bubble burst.
The median price of a new home rose to $235,700 last month, up 4.9 percent from a year ago.
A separate report from the Federal Housing Finance Agency showed house prices in March were up 2.7 percent from a year ago, the largest gain since November 2006. The increase reflected a 1.8 percent rise in March from February, the biggest monthly jump on records dating to 1991.
Still, prices by FHFA's measure remain about 18 percent below the peak reached in April 2007. Other measures suggest prices have even further to climb to make up the lost ground.
"Even though we have seen home prices start to turn, our concern is that in the second half of the year as more foreclosures come into the market, we could see a dip in prices," said Jeremy Lawson, a senior economist at BNP Paribas in New York.
ROBUST SPRING SELLING
U.S. stocks staged a late-day reversal to end mostly higher, while Treasury debt prices were lifted by flight-to-safety flows as concerns about Europe's debt crisis mounted. The dollar rose against a basket of currencies.
The improving housing market picture helped Toll Brothers Inc, the largest luxury home builder, report a higher-than-expected quarterly profit and a strong jump in new orders.
"The spring selling season has been the most robust and sustained since the downturn began," Chief Executive Douglas Yearley said in a statement.
Despite the rise in sales, the market continues to be hamstrung by an oversupply of previously owned homes - especially from foreclosures, many of which sell well below their market value.
New home sales account for about 7.6 percent of the overall housing market and face stiff competition from previously owned homes, even though builders are carefully managing inventory.
"As sales pick up, we should start seeing better levels of starts and that would mean more construction jobs," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
"Nevertheless, with the all-clear sign on foreclosures now out, the pressure on the newly built portion of the market will remain high for a long time."
While the inventory of new homes on the market rose 1.4 percent to 146,000 units last month, it remained near record lows. At April's sales pace it would take 5.1 months to clear the houses from the market, down from 5.2 months in March.
New home sales last month were buoyed by a 28.2 percent jump in the Midwest. Sales in the Northeast rose 7.7 percent, to the highest level in over a year, while in the West sales soared 27.5 percent. Sales were down 10.6 percent in the South.
A separate report from the Mortgage Bankers Association showed applications for loans to buy houses fell for a second straight week last week, even though mortgage rates dropped to a record low.
Signs of recovery in the housing market have spurred interest from some big-name investors. Oliver Chang, the head of U.S. housing strategy at Morgan Stanley, announced this week that he was departing to start a buy-to-rent housing fund.
The appetite for private label residential mortgage-backed securities has strengthened among investors rattled by broader market volatility.