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Sales of Existing Homes Rise 4.3%

Sales of previously owned U.S. houses rose in January to the highest level since May 2010, adding to signs the housing market is regaining its footing.
Purchases climbed 4.3 percent to a 4.57 million annual rate, less than forecast, from a revised 4.38 million pace in December that was slower than previously estimated, a report from National Association of Realtors showed today in Washington. The median forecast in a Bloomberg News survey called for a rise to 4.66 million. Prices and inventory fell.
A strengthening job market, combined with record affordability driven by low home prices and mortgage rates, is helping underpin demand. Nonetheless, the Federal Reserve and Obama administration are striving to find ways to lend the industry additional assistance amid concern mounting foreclosures will continue to hinder the recovery.
“I don’t think we’re seeing a full-fledged recovery in housing,” said Michelle Meyer, a senior economist at Bank of America Corp. in New York. “Outside of investors and people wanting to buy distressed properties, the primary housing demand is recovering much more gradually.”
Estimates of the 74 economists surveyed by Bloomberg ranged from 4.4 million to 4.91 million after a previously reported 4.61 million pace in December.
Stocks held losses after the report and as separate data spurred concern about growth in the European and Chinese economies. The Standard & Poor’s 500 Index fell 0.3 percent to 1,358.81 at 10:38 a.m. in New York.
Last Year
Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.
The number of previously owned homes on the market dropped to 2.31 million, the fewest since March 2005. At the current sales pace, it would take 6.1 months to sell those houses, the lowest since April 2006, down from 6.4 months in December.
The median price of a previously-owned home fell 2 percent to $154,700 from $157,900 in January 2011, today’s report showed. The median price dropped to $166,100 last year, the lowest since 2002, from $172,900 in 2010.
Sales of existing single-family homes increased 3.8 percent to an annual rate of 4.05 million. Purchases of multifamily properties, including condominiums and townhouses, rose 8.3 percent to a 520,000 pace.
By Region
Purchases rose in all four U.S. regions, led by an 8.8 percent gain in the West and a 3.5 percent increase in the South.
The fourth-warmest January on record may have helped bring out homebuyers. The National Oceanic and Atmospheric Administration reported the average temperature was 36.3 degrees Fahrenheit (2.39 Celsius), 5.5 degrees above the 1901-2000 long- term average.
The favorable conditions helped spark Home Depot Inc. (HD)’s biggest sales gain since the first quarter of 2004. The world’s largest home-improvement retailer said yesterday that receipts at stores open at least a year climbed 5.7 percent in the three months ended Jan. 29. Net income increased 32 percent, the Atlanta-based company said.
Today’s housing report showed contract cancellations were reported by 33 percent of the group’s members in January, the same as a month earlier.
Distressed Sales
Of all purchases, cash transactions accounted for about 31 percent, about the same as a year ago. 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 35 percent of the total, up from 32 percent a month earlier.
Investors accounted for 23 percent of purchases last month, while first-time buyers were 33 percent of the market.
One asset has been the improvement in employment. The jobless rate fell in January to a three-year low of 8.3 percent, and payrolls rose by 243,000 workers. Employment growth has accelerated in each of the past three months.
Greater affordability is also supporting home demand. The Realtors group’s measure of whether households earning the median income can afford a median-priced house at current interest rates reached record levels in the last three months of 2011.
On Mend
Reports last week indicated housing is on the mend. Builders broke ground on more homes than forecast in January, helped by warmer weather, and permits also advanced. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in February to the highest level since May 2007.
Beazer Homes USA Inc. (BZH) reported that orders jumped 36 percent in the final three months of 2011 from a year earlier, and closings on new houses surged more than 60 percent. The Atlanta-based builder said it expects to sell more properties this year than last.
“While our visibility into the economic conditions for the remainder of the year is limited, I believe that we will benefit from a gradually improving housing market,” Allan Merrill, chief executive officer, said on an earnings call on Feb. 2.
Policy makers are working to help distressed homeowners. The top five mortgage lenders this month reached a $25 billion settlement with 49 states and the U.S. government over the use of faulty paperwork in foreclosures.
Fed’s Bernanke
Fed Chairman Ben S. Bernanke said the central bank’s efforts to spur growth are being blunted by impediments to mortgage lending, and called for more steps to heal the housing industry.
“The economic recovery has been disappointing in part because U.S. housing markets remain out of balance,” Bernanke told homebuilders on Feb. 10 in Orlando, Florida. “We need to continue to develop and implement policies that will help the housing sector get back on its feet.”
The foreclosure crisis is unlikely to subside any time soon. Owners of more than 14 million homes are in foreclosure, behind on their mortgages or owe more than their properties are worth, said RealtyTrac Inc., a property-data company in Irvine, California.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net