Rising home sales point to sustained U.S. expansion
Sales of previously owned homes increased in January and an index of leading indicators climbed for a second month as the rebound in housing helped to broaden the U.S. expansion.
Purchases of existing houses rose 0.4 percent to a 4.92 million annual rate, figures from the National Association of Realtors showed. A gauge of the economic outlook for the next three to six months advanced 0.2 percent after a 0.5 percent December gain, according to the New York-based Conference Board.
Improving home sales combined with dwindling inventory spurred the biggest advance in property values since 2005, helping mend household finances. The gain in housing, the industry that was at the center of the financial crisis, may help consumers overcome an increase in the payroll tax and rising gasoline prices that pose a risk to spending.
"The economy has legs," said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, a unit of the largest U.S. mortgage lender. "A lot of people are much more confident. Housing has picked up, and I think it's sustainable."
The median forecast of 79 economists surveyed by Bloomberg projected the January pace of existing home sales at 4.9 million. Estimates ranged from 4.7 million to 5.1 million. The prior month's pace was revised to 4.9 million from a previously reported 4.94 million.
The number of previously owned homes on the market fell 4.9 percent to 1.74 million, the fewest since December 1999, the report from the Realtors' group showed. At the current sales pace, it would take 4.2 months to sell those houses, the fewest since April 2005.
"Inventory has increasingly become the story of the housing market," Lawrence Yun, NAR chief economist, said in a news conference as the figures were released. "We do expect some relief in inventories as the spring season comes around." He also said that "only the home-builders can truly relieve the inventory" shortage.
PulteGroup, Lennar Corp. and D.R. Horton Inc., the top three U.S. home-builders by market value, said orders rose in the most recently reported quarter. A report from the Commerce Department showed single-family home starts increased in January to the highest level since July 2008.
Gains in construction will probably ripple out to other parts of the economy.
"If housing starts really do pick up as we expect and the economy picks up as we expect, I think what you'll see is pretty good growth in the residential business" Gregory Hayes, chief financial officer at United Technologies Corp., said at a Feb. 7 conference. The Hartford, Connecticut-based company's products include Carrier air conditioners and Otis elevators.
Tight supply and growing demand are helping firm property values. The median price of an existing home rose to $173,600 last month, up 12.3 percent from January 2012, the real-estate agents' report today showed. It marked the biggest 12-month increase since November 2005.