Record-low mort­gage rates may lift hous­ing

The Pak Banker - - Front Page -

NEW YORK

The low­est mort­gage rates on record prob­a­bly helped keep sales of pre­vi­ously owned US homes close to a two-year high in Oc­to­ber, and un­der­pinned con­struc­tion of new res­i­dences, economists said be­fore two re­ports this week.

Pur­chases of ex­ist­ing dwellings held at a 4.75 mil­lion an­nual rate last month, ac­cord­ing to the me­dian fore­cast in a Bloomberg sur­vey be­fore to­mor­row's re­port from the Na­tional As­so­ci­a­tion of Real­tors. Hous­ing starts eased in Oc­to­ber to an 840,000 pace from a four-year high of 872,000 units in Septem­ber, Com­merce Depart­ment fig­ures may show Nov. 20.

De­mand for res­i­den­tial real es­tate is also be­ing pro­pelled by more af­ford­able prop­er­ties, progress in the la­bor mar­ket and im­prov­ing con­sumer sen­ti­ment. The data un­der­score what Fed­eral Re­serve Chair­man Ben S. Ber­nanke called "signs of im­prove­ment" in the mar­ket, which is help­ing fuel the ex­pan­sion as man­u­fac­tur­ing cools.

"Hous­ing has def­i­nitely be­come a bright spot in the econ­omy, while all the in­ter­na­tional-fac­ing sec­tors are do­ing much worse," said Ye­lena Shuly­atyeva, U.S. econ­o­mist at BNP Paribas in New York. The econ­omy should sus­tain a "mod­est re­cov­ery" through year-end, she said.

Ex­ist­ing-home sales have im­proved af­ter reach­ing a 3.39 mil­lion an­nual rate in July 2010, the low­est since com­pa­ra­ble records be­gan in 1999. In the buildup to the subprime lend­ing col­lapse and re­ces­sion, pur­chases reached a peak of 7.25 mil­lion in Septem­ber 2005.

Con­fi­dence among home­builders, as mea­sured by the Na­tional As­so­ci­a­tion of Home Builders/Wells Fargo in­dex, held at 41 in Novem­ber, the high­est since June 2006, data to­mor­row may show. Read­ings lower than 50 mean more re­spon­dents still said con­di­tions were poor.

The av­er­age rate on a 30year, fixed mort­gage de­clined to 3.34 per­cent last week, the low­est in data go­ing back to 1972, ac­cord­ing to McLean, Vir­ginia-based Fred­die Mac.

The Stan­dard & Poor's Su­per­com­pos­ite Home­build­ing In­dex has ad­vanced 70 per­cent since the end of last year, out­pac­ing the 8.1 per­cent gain in the broader S&P 500.

The hous­ing mar­ket would ac­cel­er­ate even more if it was ac­com­pa­nied by a big­ger pickup in em­ploy­ment, ac­cord­ing to home­builder D.R. Hor­ton Inc. (DHI) The Fort Worth, Texas-based com­pany, which is the largest U.S. home­builder by vol­ume, re­ported fis­cal fourth-quar­ter earn­ings last week that beat an­a­lysts' es­ti­mates.

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