Housing sector turning the corner; jobs market firming

WASHINGTON Thu May 22, 2014 1:16pm EDT

A man grabs his briefcase as he waits in line to speak with employers at the UJA-Federation Connect to Care job fair in New York, March 21, 2012. REUTERS/Shannon Stapleton

A man grabs his briefcase as he waits in line to speak with employers at the UJA-Federation Connect to Care job fair in New York, March 21, 2012.

Credit: Reuters/Shannon Stapleton

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WASHINGTON (Reuters) - U.S. home resales rose in April and the supply of properties on the market hit its highest level in nearly two years, hopeful signs for the stalled housing market recovery.

The National Association of Realtors said on Thursday existing home sales increased 1.3 percent to an annual rate of 4.65 million units, marking only the second gain in sales in nine months.

While that was a bit less than the 4.68-million unit pace economists had expected, it suggested the sector was regaining its footing after stumbling in the second half of 2013 under the weight of higher mortgage rates and house prices.

"This report provides the first crucial sign that the housing recovery may be on the verge of a rebound," said Millan Mulraine, deputy chief economist at TD Securities in New York.

Sales remain down 15 percent from a peak of 5.38 million units hit in July. Compared to April last year, sales fell 6.8 percent.

Housing is one of the main channels through which the Federal Reserve is seeking to boost growth via its monthly bond purchases. The housing slump has prompted Fed Chair Janet Yellen to caution it could undermine the economy.

Expensive home loans and rising house prices have sidelined first-time buyers. Investors, who had buoyed the market by buying homes to rent them out, also are stepping back.

Though an usually cold winter depressed activity, a dearth of homes for sale also stymied demand. Sales are expected to gradually trend higher for the rest of 2014 as job growth and the overall economy accelerate.

Other reports on Thursday showed manufacturing activity accelerated in May, with financial data firm Markit's "flash" U.S. manufacturing purchasing mangers index rising to 56.2 from 55.4 in April.

Labor Department data showed initial claims for state unemployment benefits rose 28,000 to 326,000 last week. The four-week average, which irons out week-to-week volatility, rose by only 10,500, indicating the underlying jobs market trend remains strong.

LABOR MARKET FIRMING

"Initial claims remain in a range that suggests that labor market conditions are solid and the recent pace of job creation should continue," said Jim Baird, chief investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.

U.S. stocks rose modestly and the dollar firmed against a basket of currencies. Prices for U.S. government debt fell.

The firming labor market and easing in mortgage rates should help to stimulate demand for housing. Last week, the 30-year fixed mortgage rate hit its lowest level since November.

And there are more reasons to be optimistic about housing.

The inventory of unsold homes on the market increased 6.5 percent from a year-ago to 2.29 million in April. That was the highest level since August 2012. The median home price rose 5.2 percent, the slowest pace since March 2012.

"The biggest story to come out of this report is the boost in home inventory, which has been one of the key issues holding back both buyers and sellers in the first part of this year," said Bill Banfield, vice president of Quicken Loans in Detroit.

The month's supply of existing homes increased to 5.9 months, the highest level since August 2012, from 5.1 months in March. Six months' supply is normally considered a healthy balance between supply and demand.

(Reporting by Lucia Mutikani; Additional reporting by Jason Lange; Editing by Paul Simao)

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Comments (19)
tmc wrote:
When will we admit that we are going to continue losing jobs to automation and globalization and actually do something about it? I’m not saying we should try to stop the train. Just that we must admit that we’re on the tracks and step off of them. We need to plan our economy accordingly. But it is not possible to do that within an oligarchy and unbridled capitalism. We’ll just run smack into that train instead.

May 22, 2014 10:06am EDT  --  Report as abuse
gcf1965 wrote:
A well known European based troll said this last week

“All those people added to the payroll? They are not real – the employers are all lying, pretending to have new employees when they don’t. All the new jobs? BLS is lying. Reduced numbers of new signings? The whole damn US population is lying. They want to sign up but don’t do it just to spite Republicans.”

I wonder what the same poster will say this week after the numbers they love so much increased more this week than they decreased last week.

May 22, 2014 10:19am EDT  --  Report as abuse
Randy549 wrote:
We need to “plan the economy accordingly?” I think not. Planned economies have a universally dismal track record; ask the Soviets.

It is *individuals* who need to plan accordingly. Develop your job skills in areas that not anyone off the street can perform. The days of getting high wages for low-skill work, just because you belong to a union, are long-gone. The United States had it really, really good from the 1950′s up until the end of the ’80s, because the rest of the world was either bombed out from World War 2 or completely undeveloped. Unfortunately, the US population grew accustomed to that environment (as any population would), and now the return to “normal” seems like bad times. But it’s really just the return to normal.

May 22, 2014 10:36am EDT  --  Report as abuse
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