Record-low mortgage rates may lift housing
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.