The message of economic recovery is gaining traction:
U.S. Economy: Home Resales Surge to a Record Pace in January
from Bloomberg
By Carlos Torres and Monee Fields-White
Washington, Feb. 25 (Bloomberg) -- Sales of previously owned U.S. houses rose more than expected in January to a record pace, a sign housing will help the economy rebound from a recession that began last March.
Home resales increased 16.2 percent to an annual rate of 6.04 million from a 5.2 million-unit pace in December, the National Association of Realtors said. The increase reflected record sales in each region.
``The real estate market is carrying this economy right now,'' said Bill Neary, president of the 20,000-member Maryland Association of Realtors and an agent at Coldwell Realty Pros in St. Michaels, Maryland.
Houses are becoming more affordable partly because 30-year fixed mortgage rates are close to the lowest in the three decades Freddie Mac has been keeping records. Rising sales are bolstering revenue at Cendant Corp., a franchiser of Coldwell Banker and Century 21 real estate agencies.
U.S. Treasury prices fell after the report suggested the economy is stronger than expected and may encourage Federal Reserve policy makers to raise interest rates. Stocks rose on optimism that corporate profits are rebounding.
Home sales often spur the economy by prompting new owners to buy furniture and appliances and undertake other home improvement projects. Lowe's Cos. said its fiscal fourth-quarter profit rose a greater-than-expected 55 percent. The second-largest home- improvement retailer expects first-quarter profit also will exceed analysts' estimates.
Setting Records
The January home resales rate exceeded the previous record of a 5.49 million-unit pace in August of last year. Resales are projected to total 5.2 million this year, which would make 2002 the third best on record, according to the real estate association. A record 5.3 million previously owned homes were sold last year.
At Neary's office, agents have written 20-25 purchase contracts in the last two weeks. That's 20 percent to 30 percent more than the average for this time of year, he said.
Sales were records in all regions. They rose 16.4 percent in the Northeast, 8.3 percent in the Midwest, 16.1 percent in the South and 23.3 percent in the West.
The median price of a previously owned home fell to $151,100 last month from $153,100 in December. The supply of homes available for sale, another gauge of housing demand, fell to 4.1 months' worth in January, from 4.2 months' worth.
The Treasury's 4 7/8 percent note maturing in February 2012 fell 1/4 point, pushing up its yield 3 basis points to 4.86 percent.
The Dow Jones Industrial Average rose 106 points, or 1.1 percent, and the Nasdaq Composite Index climbed 22 points, or 1.3 percent..
Mortgage Rates
The rate on a 30-year fixed mortgage averaged 7 percent in January, down from an average of 7.07 percent the previous month, according to data from Freddie Mac, the No. 2 buyer of U.S. mortgages. The rate reached 6.45 percent in November, the lowest since Freddie Mac started keeping records in 1972.
Mortgage rates have declined this month. The 30-year fixed rate dropped to 6.81 percent this week.
The low rates are making homes more affordable. The real estate group's index measuring housing affordability rose to the highest level in 27 years during the fourth quarter of last year. The index showed the typical household had 148.8 percent of the income needed to purchase the median priced home with 20 percent down.
Improved confidence in the economy is also playing a role in strong sales. Confidence rose to a five-month high in January.
What's more, ``the United States attracts a large number of immigrants at the same time children of the baby boom are entering their prime years for buying a home,'' said Martin Edwards, president of the National Association of Realtors.
Mortgage Applications
The number of people seeking loans for home purchases rose to a record in the first week of January, according to the Mortgage Bankers Association of America. Previously owned homes account for 85 percent of all houses sold and are considered an important gauge of consumer demand.
La-Z-Boy Inc. is already benefiting. The largest U.S. home- furniture maker said last week fiscal third-quarter profit rose 35 percent as sales of sofas and recliners increased.
A ``housing market that's continued to stay extremely strong through the majority of the last 12 to 18 months, has created a lot of pent up demand,'' said Jerry Kiser, the company's chief executive officer, in an interview last week. ``We are optimistic that we are seeing that convert at retail at this stage.''
Furniture Sales
Retail furniture sales rose 0.4 percent last month, the fourth straight increase, after rising 1 percent in December, according to Commerce Department data. The last time sales rose for four consecutive months was February-May 2000.
At Lowe's, sales at stores open at least a year increased 7.4 percent in the three months that ended Feb. 1, the company said. That helped boost fiscal fourth quarter net income to $218.4 million from $140.8 million in the same three months a year earlier, the Wilkesboro, North Carolina-based company said in a statement distributed by PR Newswire.
The strong pace of sales and applications is being reflected in improved earnings at Cendant. That company said this month that revenue at its real estate services unit rose 41 percent to $532 million in the fourth quarter. The improvement, in part, was due to an increase in its mortgage operations.
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Best Regards, J.T. |
