Sales of existing homes rose less than forecast in November as the industry that triggered the worst U.S. recession in seven decades struggled to recover after a government tax credit lapsed.
Purchases increased 5.6 percent to a 4.68 million annual rate, the National Association of Realtors said in Washington. Economists projected sales would rise to a 4.75 million pace, according to the median forecast in a Bloomberg News survey. The median price rose 0.4 percent from a year earlier.
Previous decreases in prices and mortgage rates have made houses more affordable, which may keep supporting demand after the end of a government tax credit caused the industry to slump. At the same time, unemployment hovering near 10 percent is a reminder it will take years for housing to regain pre-recession levels.
“Housing demand will pick up, though it’ll be slow in the beginning,” Michelle Meyer, a senior U.S. economist at Bank of America Merrill Lynch Global Research in New York, said before the report. “There’s some payback for the prior month. Potential buyers are going to be cautious. We need to see the unemployment rate come down” for a sustained recovery.
Stocks held earlier gains after the report. The Standard & Poor’s 500 Index rose 0.2 percent to 1,256.61 at 10:05 a.m. in New York. The S&P Supercomposite Homebuilder Index was little changed at 256.5.
Less Than Forecast
Estimates of the 70 economists surveyed by Bloomberg ranged from 4.25 million to 5.2 million.
Another report today showed the U.S. economy grew at a 2.6 percent annual rate in the third quarter, more than previously calculated 2.5 percent gain and up from a 1.7 percent rise in the second quarter, according to figures from the Commerce Department. The advance was lower than the median forecast of economists surveyed as consumer spending was unexpectedly revised down.
Compared with November 2009, which was the peak of the tax credit’s influence, existing home sales were down 25 percent before adjusting for seasonal patterns.
Sales last month rose in all of four regions, today’s report showed, led by a 12 percent gain in the West.
The median price increased to $170,600 last month from $170,000 in November 2009.
Purchases of single-family homes climbed 6.7 percent to a 4.15 million annual rate in November from a month earlier, the group said. Sales of condominiums and townhouses dropped 1.9 percent.
The number of previously owned homes on the market fell 4 percent to 3.71 million. At the current sales pace, it would take 9.5 months to sell those houses, compared with 10.5 months in October.
Month’s supply in the eight months to nine months range is consistent with stable home prices, the group said.
Distressed sales, which include foreclosures and short- sales in which the bank allows a home to sell for less than the full amount of the mortgage, accounted for 33 percent of total sales, about the same as in prior months.
A tax credit worth as much as $8,000 boosted sales to a two-year high 6.49 million pace in November 2009, when the incentive was originally due to expire.
The subsequent extension of the credit prompted a rebound in sales for two months through April, followed by a plunge in July to a 3.84 million rate, the weakest in a decade’s worth of record-keeping.
The real-estate agents’ group projects sales for the year will drop to a 4.8 million pace, the fewest for a full year since 1997. Purchases will climb to 5.2 million in 2011, a “sustainable” pace, NAR’s chief economist Lawrence Yun said in a press conference.
Less costly houses, near record-low lending rates and rising earnings are among the factors now helping underpin demand. The NAR’s housing affordability index, which takes into account borrowing costs, home prices and household incomes, climbed to a record in October.
The housing market may remain a drag on growth. Foreclosure moratoriums across the country along with government investigations into faulty paperwork threaten to delay a recovery as houses slated for repossession take longer to come to market.
Joblessness is forecast to average 9.4 percent next year and mortgage rates, after reaching record lows in November, have risen on signs the economy is picking up, additional reasons why a housing recovery will take time to develop.
Even so, home sales will probably avoid setting new lows and the industry will gain momentum in 2012, according to Douglas Yearley, chief executive officer of Toll Brothers Inc., the largest U.S. luxury-home builder.
“As the economy improves, we believe our buyers are going to come right back out.” Yearley said in a Dec. 8 interview with Bloomberg Television. “It’s still a buyer’s market and you still need some incentives.”
© Copyright 2017 Bloomberg News. All rights reserved.