Existing home sales rise, supply edges down

By Lucia Mutikani

WASHINGTON (BestGrowthStock) – Sales of previously owned U.S. homes rose a greater-than-expected 10 percent in September but remained at depressed levels that point to a painful and protracted recovery for the housing market.

The rise took sales to an annual rate of 4.53 million units, the National Association of Realtors said on Monday. It was the second monthly gain and far outstripped economists’ expectations for an increase to a 4.30 million-unit pace.

Still, the data did little to weaken the case for further monetary easing from the Federal Reserve, with sales far below the 5 million-unit pace usually associated with a healthy market.

“This is relatively goods news but the housing market situation has a long way to go before it fully recovers,” said Chris Christopher, a senior economist at IHS Global Insight in Lexington, Massachusetts.

The report had little impact on U.S. financial markets as investors continued to look ahead to the November 2-3 Fed meeting at which officials are expected to decide to inject more money into the economy through bond purchases to drive borrowing costs lower and stimulate demand.

Expectations of further Fed easing pushed the U.S. dollar to a fresh 15-year low against the yen and weakened it against most major currencies. Stocks on Wall Street rose to a 5-1/2 month high as traders anticipated a looser monetary policy and piled into riskier assets.

Prices of U.S. government debt drifted mostly lower as traders booked profits from a rally early in the session.

STABILITY AT LOW LEVELS

The Fed cut overnight interest rates to near zero in December 2008 and has already bought about $1.7 trillion worth of Treasury and mortgage-related debt. That helped push mortgage rates to historic low levels.

The housing market is showing signs of having bottomed after hefty declines in the aftermath of the end of a popular tax credit for home buyers earlier this year.

Activity, however, remains very subdued and the recovery is expected to be very slow given the 9.6 percent U.S. unemployment rate. A cloud of uncertainty from investigations into the processing of foreclosures by some banks looms over the sector, which was at the heart of the 2007-2009 recession.

Last month, foreclosed properties accounted for 23 percent of sales while short sales made up 12 percent. The combined percentage was up slightly from August. First-time buyers accounted for 32 percent of transactions in September.

There are concerns the foreclosure investigation could slow the housing market correction as banks hold back on sales. According to the NAR, foreclosed properties constitute about 20 percent of homes on the market.

The industry group said a survey of its members taken two weeks ago showed buyers were becoming hesitant to snap up foreclosed properties, worried they might not be dealing with the lawful owner.

Sales of single-family homes and condominiums both rose, the report showed. A 1.9 percent fall in the supply of houses available for sale to 4.04 million units also offered a sign of increased stability in the market.

Still, the inventory — a 10.7 months’ supply — remained high and economists believe sales will level off soon, citing a recent drop in applications for loans to buy homes. They fear the supply overhang will continue to weigh on prices.

“Together with additional supply from ‘shadow inventories’ such as foreclosures and looming delinquencies, it means that housing prices will likely remain under pressure and continue trending lower throughout this year and next,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The national median home price fell 2.4 percent last month from September of last year to $171,700.

(Editing by Neil Stempleman and Dan Grebler)

Existing home sales rise, supply edges down