WASHINGTON — Sales of previously owned homes and work on single-family projects climbed in August to the highest levels in two years, signaling the residential real estate market is contributing to the U.S. economic recovery.
Purchases of existing houses increased 7.8 percent to a 4.82 million annual rate, the most since May 2010, figures from the National Association of Realtors showed Wednesday in Washington. The median forecast of 78 economists surveyed by Bloomberg called for sales to increase to a 4.56 million pace. Commerce Department data showed builders began work on the most single-family homes since April 2010.
Record-low mortgage rates, more affordable properties and limited supply of new homes are driving orders at builders such as Toll Brothers and Hovnanian Enterprises. In addition, sales of distressed properties are starting to account for a smaller share of the market, leading to gains in home values that are laying the groundwork for a sustained economic expansion as household sentiment and finances improve.
“The nascent housing recovery has deepened,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International in New York, who projected existing-home sales would climb to a 4.85 million rate. “Ultimately, this improvement will lead to a rise in residential wealth, which tends to lift consumer confidence and spending.”
Construction of single-family houses climbed 5.5 percent to a 535,000 rate, the fastest since April 2010, after a 4.5 percent decrease, the Commerce Department said Wednesday in Washington. Permits for the building of single-family homes increased 0.2 percent to a 512,000 annual pace, the highest since March 2010.
Beginning construction of all homes rose 2.3 percent to a 750,000 annual rate in August, less than forecast and restrained by a decrease in starts of multifamily dwellings that are volatile month to month.
Work on apartments and other multi-family homes dropped 4.9 percent to an annual rate of 215,000.
The housing rebound extends beyond builders—from home-furnishings retailers like Lowe’s and Home Depot to building materials supplies such as gypsum wallboard-maker USG Corp.
U.S. housing market recovery 2012
Existing-home sales have improved after reaching a low of a 3.39 million annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.
Estimates in the Bloomberg survey for August ranged from 4.45 million to 4.85 million. Compared with a year earlier, purchases increased 11 percent in August, Wednesday’s report showed.
The median price of an existing home climbed 9.5 percent to $187,400 from $171,200 in August 2011. Prices have increased in each of the past six months on a year-to-year basis, the best performance since early 2006.
The increase in prices reflects both a reduction in distressed sales and a “genuine” appreciation in property values, Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released.
The gain in home values may induce potential buyers and sellers to enter the market. Prices last quarter posted their first year-over-year gain since 2007, according to Zillow Inc., the Seattle-based operator of the largest real-estate information website.
Higher real estate values also helped more than 1.3 million homeowners regain equity in the first six months of 2012, according to CoreLogic. About 22.3 percent of homeowners with a mortgage owed more than their homes were worth at the end of June, down from 23.7 percent three months earlier.
Even with pricier real estate, homes remain affordable. The average rate on a 30-year fixed mortgage was at 3.55 percent in the week ending Sept. 13, near 3.49 percent, the lowest since records began in 1971, Freddie Mac data showed.
The Federal Reserve has also committed to purchasing $40 billion of mortgage debt a month to lower borrowing costs, helping the housing market that Chairman Ben S. Bernanke called “one of the missing pistons in the engine.”
“Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing,” Bernanke said in a Sept. 13 press conference after the central bank announced the debt-buying plans.
Homebuilders such as Red Bank, New Jersey-based Hovnanian Enterprises Inc. and Toll Brothers are seeing increased demand.
“Due to the industry’s rebound and our increase in sales pace, our communities are selling out more quickly and literally caught us without being able to replenish as fast as we’d like,” Ara K. Hovnanian, the company’s chairman, president and chief executive officer, said on a Sept. 6 earnings call.
Toll Brothers, the largest U.S. luxury-home builder, reported a better-than-estimated profit and an increase in revenue for its third quarter endimg July 31. The average price of the homes that the Horsham, PA.-based company delivered in the quarter climbed to $576,000 from $557,000 in the previous three months.
“The housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes,” Chief Executive Officer Douglas Yearley Jr. said on an Aug. 22 conference call with investors. “With an industry wide shortage of inventory in many markets, we are enjoying some pricing power.”