Existing Home Sales Hit 18-Month High, Prices Rise

Pending Home Sales
Wilfredo Lee/AP

By Lucia Mutikani

WASHINGTON -- U.S. home resales surged to their highest level in 18 months in March as more homes came on the market, a sign of strength in housing ahead of the spring selling season.

The National Association of Realtors said Wednesday existing home sales increased 6.1 percent to an annual rate of 5.19 million units, the highest level since September 2013. The percent increase was the largest since December 2010.

The fairly upbeat report was another indication that the economy was regaining some momentum after hitting a speed bump at the start of the year. But data on retail sales, housing starts and manufacturing suggest the rebound in second-quarter growth will probably be insufficient to convince the Federal Reserve to start raising interest rates in June.

%VIRTUAL-pullquote-The stronger rebound in existing sales is extremely encouraging as it hints at a nascent rebound in economic activity over the coming weeks.%"The stronger rebound in existing sales is extremely encouraging as it hints at a nascent rebound in economic activity over the coming weeks," said Gennadiy Goldberg, an economist at TD Securities in New York.

Economists polled by Reuters had forecast home resales rising to only a 5.03 million-unit pace last month.

The U.S. housing index fell in line with the broader stock market. The dollar was weaker against a basket of currencies. Prices for U.S. Treasury debt fell.

Home sales have been constrained by a shortage of properties on the market, which has pushed up home prices and limited choice for potential buyers.

The outlook for housing is favorable against the backdrop of a strengthening labor market.

In a separate report, the Mortgage Bankers Association said applications for loans to purchase homes increased 5 percent last week to the highest level since June 2013. It was the fourth time in five weeks that purchase applications rose.

In March, the inventory of unsold homes on the market increased 5.3 percent from a month ago to 2 million units, the highest level since last November. Supply was up only 2 percent from a year ago.

Inventory growth should be averaging roughly 5.6 percent at this time of the year, when the market gets ready for the spring selling season, which runs from April through August and is traditionally the busiest time of the year for housing, according to the Realtors association.

Realtors and economists say insufficient equity and uncertainty about the economy's strength were forcing potential sellers to stay longer in their homes. A recent survey by the Realtors association showed homeowners on average staying in their homes for 10 years instead of the typical seven years.

At March's sales pace, it would take 4.6 months to clear houses from the market, down from 4.7 months in February. A supply of six months is viewed as a healthy balance between supply and demand.

With supply still tight, the median price for a previously owned home increased 7.8 percent from a year ago to $212,100.

That was the largest percentage gain since February 2014 and suggested that the pace of home price increases, which had been slowing after double-digit growth for much of 2013, appears to be reaccelerating.

First-time buyers accounted for 30 percent of transactions last month, well below the 40 percent to 45 percent share that economists and realtors say is required for a strong housing recovery.