Home sales probably climbed last month to their highest level since November 2009, showing residential real estate is becoming a mainstay of US economic growth.
Combined purchases of existing and new houses rose to a 5.74 million annualized pace last month, according to the median forecasts of economists in a Bloomberg survey. Other figures may show manufacturing is improving, eliminating a source of weakness for the expansion.
The housing gains will probably be sustained as would-be buyers with access to credit rush to lock in mortgage rates before they climb much more. The construction-industry rebound, combined with rising demand for automobiles, is contributing to a stabilizing in manufacturing that will help the world’s largest economy gain momentum in the second half of the year.
“The housing market is clearly recovering this year about as fast as you’d expect in a normal expansion,” Boulder, Colorado-based Action Economics LLC chief economist Mike Englund said.
The rebound is “a big plus for June, July manufacturing,” along with improvement in the auto market, he said.
Sales of previously owned homes rose to 5.26 million annualized pace last month from 5.18 million the previous month, according to the median forecast of economists surveyed before the National Association of Realtors’ report today.
On Wednesday, US Department of Commerce data will show purchases of new homes increased to a 484,000 pace last month, the highest level since June 2008, according to the median forecast in the Bloomberg survey.
A report last week showed builder confidence rose this month to the highest level in seven years as companies grew more upbeat about sales prospects.
KB Home, based in Los Angeles, is among companies enjoying improving demand for housing.
“Housing dynamics are significantly better than they were a year ago,” KB Home chief executive Jeffrey Mezger said in a June 27 earnings call. “We are still in the early innings of a recovery that is continuing to accelerate. The positive factors underpinning the current housing recovery remain fully in place and will continue to drive favorable market fundamentals.”
Speculation that the US Federal Reserve is getting closer to paring its bond buying has caused mortgage rates to increase. The average rate on a 30-year fixed loan was at 4.37 percent in the third week of this month, up from a record low of 3.31 percent in November last year, according to data from Freddie Mac.
US Federal Reserve Chairman Ben Bernanke tried to reassure markets during his two-day semi-annual testimony before the US Congress last week that the central bank is monitoring the situation.
“We will be watching to see if the movement in mortgage rates has any material effect on housing,” Bernanke said during questioning before the House of Representatives Committee on Financial Services. “If we think that mortgage-rate increases are threatening that progress, then we would have to take additional action in the monetary sphere to try to address that.”
Builder shares have suffered over concern that the increase in borrowing costs will hurt demand.