|
Aug 2005 home resales prices unexpectedly surged Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=anJa_Q1btUHg&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=anJa_Q1btUHg&refer=home
U.S. Economy: August Home Resales, Prices Surge (Update3)
Sept. 26 (Bloomberg) -- Sales of previously owned homes unexpectedly surged in August and prices reached an all-time high, defying predictions that the U.S. housing market would soon cool.
Existing home sales rose 2 percent to a 7.29 million annual pace last month, the second-highest level on record, the National Association of Realtors said today in Washington. The median price rose 15.8 percent to a record $220,000 and the supply of homes for sale increased.
``These are tremendous numbers,'' said Kevin Harris, chief economist at Informa Global Markets in New York. ``There is nothing solid in the latest round of existing home sales data to show that we're slowing down.''
The August figures indicate the economy continues to get a boost from strong housing demand and mounting real estate values. The housing market has been the main driver of the U.S. economy this decade, accounting for 50 percent of the overall growth and more than half of the private payroll jobs created since 2001, Merrill Lynch said in a report on Aug. 15. Price appreciation helped add $5.2 trillion to Americans' balance sheets during the current expansion, according to the Federal Reserve.
The increase in median home prices in August was the strongest rate of appreciation since July 1979.
Fed's Outlook
``These figures tell you that the Fed has to keep doing more,'' said Roger Kubarych, a former Federal Reserve staff economist now senior economic adviser at HVB America Inc. in New York. ``If it hadn't been for the energy spike, we'd be talking about real boom-like conditions.''
Federal Reserve Chairman Alan Greenspan, speaking to the American Bankers Association in Palm Desert, California today, said rising demand for vacation homes is a sign ``that speculative activity may have had a greater role in generating the recent price increases.''
Greenspan concluded that a fourth to a third of home equity cashed out by households is being used to finance consumer spending, the biggest driver of U.S. economic growth. Another 25 percent goes to repay credit card debt.
Two other Fed officials said today that the economy remains strong and is likely to get a boost from rebuilding after two hurricanes struck the Gulf Coast in the last month. The comments by Chicago Fed President Michael Moskow and Fed Governor Susan Bies suggest the Fed will stick to its policy of raising interest rates at a ``measured'' pace to pre-empt a surge in inflation.
Treasury Yields Rise
U.S. Treasuries fell, pushing the yield on the benchmark 10- year note up almost 5 basis points, or 0.05 percentage point, to 4.29 percent in New York, according to bond broker Cantor Fitzgerald LP.
Hurricane Katrina slowed U.S. economic growth less than half a percentage point, according to a survey of economists released today by the National Association of Business Economics. Earlier, some government officials and forecasters were predicting a larger hit to the economy from the storm.
Economists surveyed by Bloomberg News expected home resales would fall 0.6 percent to 7.12 million from July's previously reported 7.16 million pace. Estimates ranged from 7 million to a high of 7.4 million.
Resales in July were revised to a 7.15 million rate from the previously reported 7.16 million.
Existing home sales account for about 85 percent of all sales. Purchases of new homes, to be reported by the Commerce Department tomorrow, account for the rest.
Sales of single-family homes rose 1.9 percent to a 6.35 million annual pace in August, the Realtors group said. Sales of condos and co-ops rose 2.2 percent to a 942,000 annual pace.
Regional Breakdown
Total sales were up in three of four regions. They rose 5.6 percent in the West to a 1.69 million-unit pace, 1.9 percent in the Midwest to a rate of 1.64 million units, and 1.7 percent in the Northeast to 1.21 million units. Resales fell 0.4 percent to a 2.74 million-unit pace in the South.
The supply of homes available for sale, another gauge of housing demand, increased to 4.7 months' worth in August, from 4.6 months' worth the previous month.
``We have some way to go before we get into a range of balance between home buyers and sellers,'' said David Lereah, chief economist for the Realtors' group. ``As a result, we will continue to see above-normal home-price appreciation for the foreseeable future.''
Existing home sales this year may increase 3.4 percent to 7.02 million from last year's record, the Realtors' group said in its revised forecast after Hurricane Katrina struck the Gulf Coast on Aug. 29, killing more than 1,000 people and displacing hundreds of thousands. It said new home sales would rise 6.7 percent this year to 1.28 million, also a record.
Materials Shortages
Shortages in building materials along the Gulf Coast will increase construction costs and support housing-price gains, the Realtors' group said. The national median price for housing of all types is forecast to rise 10.8 percent this year, the group said.
In the past five years, the average home has increased 53 percent in value, the Office of Federal Housing Enterprise Oversight said in a Sept. 1 report.
Even before the slowing effects of Hurricanes Katrina and Rita, steady job creation, low interest rates and increased use of non-conventional financing, such as interest-only and adjustable-rate loans, had allowed the housing market to keep growing for a fifth year. The unemployment rate fell to 4.9 percent in August, the lowest since late 2001.
Mortgage Rates
Fixed 30-year lending rates averaged 5.82 percent in August compared with 5.66 percent in July and 5.87 percent in August 2004, according to Freddie Mac, the second largest buyer of mortgages. Rates have remained within a percentage point of the all-time low of 5.21 percent reached in June 2003, even after the Federal Reserve's 11 consecutive quarter-point increases in short term rates.
New home sales that unexpectedly rose 6.5 percent to a record 1.41 million units in July augured well for existing home sales in August, said Bill Mulvihill, economist at Claymore Investments in Lisle, Illinois. New home sales are counted when contracts are signed, while existing sales are registered when the sales are closed, a month or two later.
New home sales for August are expected to number 1.35 million at an annual rate, according to a Bloomberg survey.
Last Updated: September 26, 2005 15:28 EDT
|
|
