U.S. home
resales rose in October to their highest level in more than 9-1/2 years amid
pent-up demand, offering more evidence of a pickup in economic growth early in
the
fourth quarter.
While a recent
surge in mortgage rates could hurt the housing market next year, the impact is
likely to be modest given a labor market that is at or close to full
employment.
The National
Association of Realtors said on Tuesday existing home sales increased 2.0
percent to an annual rate of 5.6 million units last month, the highest level
since February 2007. September's sales pace was revised up to 5.49 million
units from the previously reported 5.47 million units.
Economists
polled by Reuters had forecast sales slipping 0.5 percent to a 5.43
million-unit pace in October. The NAR attributed the surprise rise in sales
last month to "unrealized pent-up demand" after would-be buyers were
held back by tight supply over the summer.
Sales were up
5.9 percent from a year ago. Last month, existing home sales rose in all for
regions.
The report
came on the heels of data last week showing a surge in housing starts. It also
added to strong reports on retail sales and the labor market as well as
improving manufacturing surveys in suggesting that the economy continued to
gain speed early in the fourth quarter.
The Atlanta
Federal Reserve is forecasting gross domestic product rising at a 3.6 percent
annual rate in the fourth quarter. The economy grew at a 2.9 percent pace in
the July-September period.
The dollar
extended gains versus the yen on the existing home sales report, while prices
for U.S. government bonds were little changed. U.S. stocks were trading at
record highs, with the PHLX housing index rising 0.2 percent.
SUPPLY REMAINS
TIGHT The NAR said it expected home resales to average 5.36 million units this
year. Despite last month's surprise rise, existing home sales remain
constrained by a persistent shortage of properties available for sale.
Sales could
slow marginally early next year following a run-up in mortgage rates in the
wake of this month's election of Republican candidate Donald Trump as the next
president.
Trump's
surprise victory has led to a surge in U.S. government bond yields amid
investor concerns that the business mogul's proposed expansionary fiscal policy
agenda could fan inflation.
Mortgage rates
closely track movements in U.S. Treasury yields. Since the Nov. 8 presidential
election, the fixed 30-year mortgage rate has increased nearly 40 basis points
to average 3.94 percent, according to data from mortgage finance firm Freddie
Mac.
Both
economists and the Realtor group, however, believe the impact on home sales
would be modest provided the labor market continues to strengthen. The NAR is
forecasting existing home sales increasing to about 5.46 million units next
year.
Housing is
being supported by improving household formation as the tightening labor market
boosts employment prospects for young adults, as well as older Americans
downsizing into smaller and cheaper homes.
The dearth of
homes for sale is keeping upward pressure on house prices, sidelining some
first-time buyers. The median house price rose 6.0 percent from a year ago to
$232,200 last month.
The number of
unsold homes on the market slipped 0.5 percent from September to 2.02 million
units. Supply was down 4.3 percent from a year ago and had declined for 17
straight months on a year-on-year basis.
At October's
sales pace, it would take 4.3 months to clear the stock of houses on the
market, down from 4.4 months in September. A six-month supply is viewed as a
healthy balance between supply and demand.
In October,
new listings typically stayed on the market for 41 days. That was up from 39
days in September, but down from 57 days a year ago. Economists say builders
will need to ramp up construction of new homes to meet the pent-up demand.
House price increases are outstripping wage gains. While that could make home
purchasing expensive for first-time buyers, it is raising equity for homeowners
and enticing some to put their homes on the market.
Reuters
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