A gain in sales of U.S. previously owned homes in March failed to make up for the ground lost the prior month, a sign that the housing market is taking time to recover.
Purchases increased 3.7 percent to a 5.1 million annual rate, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price declined from a year earlier, and 40 percent of the sales were distressed properties.
Even with last month’s gains, housing may remain a weak component in the economic recovery that began in June 2009 as unemployment, falling property values and stricter loan rules push foreclosure filings to a record level. At the same time, a drop in prices has made houses more affordable, suggesting demand may not fall much more.
“We continue to just tread water along the bottom,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “The housing market is fairly depressed. We think home prices will fall further.”
Stocks held earlier gains after the report as sales at companies from Intel Corp. to Yahoo Inc. exceeded estimates and commodity producers gained. The Standard & Poor’s 500 Index rose 1.4 percent to 1,330.99 at 10:12 a.m. in New York. The Dow Jones Industrial Average was up about 176 points, or 1.4 percent, at 12443.
Estimates for March existing home sales ranged from 4.59 million to 5.4 million, according to the median of 74 forecasts in the Bloomberg survey.
“Home sales are strongest in the very-low price range” of less than $100,000 Lawrence Yun, chief economist at the Realtors’ association, said at a news conference today in Washington.
Of all purchases, cash transactions accounted for 35 percent, which is probably the highest share on record, Yun said. The realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun said.
Sales rose in three of four regions in March, led by an 8.2 percent gain in the South. The West fell 0.8 percent.
The median sales price fell 5.9 percent from March 2010 to $159,600 last month.
Homes on Market
The number of previously owned homes on the market rose to 3.55 million from February. At the current sales pace, it would take 8.4 months to sell those houses compared with 8.5 at the end of the prior month. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
Federal Reserve officials, in a statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.” The central-bank committee is scheduled to next meet April 26-27 in Washington.
Home prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said March 29.
Some underlying home values are less than the mortgages on the properties. CoreLogic Inc. last month estimated that about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million existing homes already on the market.
Cheaper homes and distressed properties are making homebuilders pessimistic. Builders overall are not optimistic. The National Association of Home Builders’ confidence fell to 16 this month, according to the group’s gauge released this week. A reading under 50 means a majority of builders view conditions as poor.
KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.
“We do not anticipate a net profit for 2011,” Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5.
“The economy is continuing to improve. Even so, this recovery has yet to include significant job growth and has not spilled over into housing.”
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