Existing-home sales rise to highest in more than a year
Sales of previously owned homes rose in August to the highest in more than a year amid lower borrowing costs and sustained income gains, adding to signs the housing market is breaking out of a slump.
Contract closings rose 1.3% from the prior month to a 5.49 million annual rate, the fastest pace since March 2018, the National Association of Realtors said Thursday. That exceeded all forecasts in a Bloomberg survey of economists, whose median projection was 5.38 million. The median sales price rose 4.7% from a year earlier — the second-fastest gain in the past year — to $278,200.
The figures follow data out Wednesday showing solid housing construction and a Thursday report on jobless claims that indicated the nation's labor market remains solid. The S&P 500 Index extended gains after the existing-home sales report and the Federal Reserve's decision on Wednesday to reduce its key lending rate.
The first back-to-back sales gain since 2017 suggests housing is on the rebound after residential investment dragged down economic growth for six straight quarters. Higher wages and lower mortgage rates are bolstering demand and affordability, though the supply of homes remains tight, pushing up prices faster than pay and inflation. At the same time, weakening business investment and slower hiring could limit any gains, as trade uncertainty weighs on the economy.
The Fed on Wednesday cut its benchmark rate by a quarter point for a second straight meeting to insure the U.S. economy against risks from global weakness and trade tensions. That should help keep mortgage costs low and support demand for houses. Chairman Jerome Powell stressed that the U.S. economic outlook is solid.
The data may also assuage concerns among some economy watchers that a recession is coming in the next year. A report Wednesday showed new home construction surged in August to the fastest pace of the expansion as homebuilders started more apartment projects and single-family houses. Permits, which are often viewed as a proxy for future construction, rose to a 12-year high.
Separately, Labor Department figures Thursday showed filings for unemployment benefits remained near a half-century low last week, suggesting the job market is still healthy. Americans' sentiment also held close to an 18-year high, according to Bloomberg Consumer Comfort Index data out Thursday.
The data show the market may have "just turned a corner for consistent gains in the upcoming months, particularly given that we are essentially at historically low mortgage rates," Lawrence Yun, NAR's chief economist, said at a briefing in Washington.
Yun reiterated concern about inventories, which were down 2.6% from a year earlier. "We need more supply," he said, adding that "if we can get more homebuilding, it will be a good outcome on many fronts."
Sales advanced in three of four regions, with the Northeast up 7.6% from the prior month, the South rising 0.9% and the Midwest increasing 3.1%. Purchases in the West fell 3.4%.
At the current pace, it would take 4.1 months to sell all the homes on the market, compared with 4.2 months in July; Realtors see anything below five months of supply as a sign of a tight market.
First-time buyers made up 31% of sales, down from 32% the previous month.
Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are counted when contracts are signed and will be released next week.