Existing US home sales surge 6.8%

Existing US home sales surge 6.8%
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: April 22 2010 14:29 | Last updated: April 22 2010 16:01
http://www.ft.com/cms/s/0/abbda48a-4e10-11df-b437-00144feab49a.html


Sales of existing US homes jumped more than expected in March, as first time home-buyers rushed to make purchases ahead of the expiration of a government tax credit, the National Association of Realtors said on Thursday.

Separately, official figures showed US wholesale prices recorded their largest annual gain since 2008 in March on the back of a big rise in food prices. Fresh claims for jobless benefits meanwhile fell last week, offering hope that the jobs market could be stabilising.

Existing home sales rose by 6.8 per cent last month, ahead of Wall Street analysts’ forecasts and a sharp improvement from February’s decline. Sales are up by 16.1 per cent from March 2009.

“The home buyer tax credit has been a resounding success as these underlying trends point to a broad stabilisation in home prices,” said Lawrence Yun, NAR’s chief economist. “This is preserving perhaps $1,000bn in largely middle class housing wealth that may have been wiped out without the housing stimulus measure.”

In March, first-time buyers accounted for 44 per cent of all existing home sales, while investors represented 19 per cent of all transactions. Housing inventory ticked up by 1.5 per cent, leaving 3.58m existing homes for sale.

Median home prices remained flat, edging up by just 0.4 per cent from a year ago to $170,700, and 35 per cent of all sales distressed properties.

Housing economists remain concerned about the onslaught of foreclosures and the impact that the expiration of the first-time homebuyer tax credit will have on the market later this month.

“Cheap home prices, an improving economy, and the highest affordability levels in a long time should keep the anaemic, gradual recovery on track,” said Mike Larson, a real estate analyst at Weiss Research.

Meanwhile, the producer price index rose 6 per cent year on year in March and was up 0.7 per cent from the previous month, according to the labour department. The monthly rise was more than economists were expecting and was fuelled by a 2.4 per cent rise in prices for consumer foods.

Core prices, excluding food and energy, remained subdued last month, rising just 0.1 per cent from February.

Economists have been keeping a close watch on producer prices to see if stimulus measures by the Federal Reserve will kickstart inflation.

“The story on PPI continues to be one of inflation pressures increasingly dissipating as they go down the pipeline,” said Alan Ruskin, strategist at RBS Securities. “There is nothing here that immediately changes a picture of the Fed having plenty of flexibility to concentrate on reinvigorating growth.”

Energy prices were muted in March, rising 0.7 per cent from the previous month, but petrol prices picked up 2.1 per cent.

In a sign of greater consumer demand, prices of finished jewellery products rose 4.9 per cent last month.

The labour market showed some signs of improving last week, with initial jobless claims fell 24,000 to 456,000 last week. That was in line with analysts’ predictions and marked an improvement from earlier this month, when claims rose sharply because of the Easter holiday.

However, analysts argue that fresh claims need to fall to the low 400,000 level before the economy can sustainably create jobs.

US workers continuing to claim jobless benefits also declined, falling 40,000 to 4.64m.

“Although reasonably in line with expectations, jobless claims remain stubbornly high,” noted John Ryding and Conrad DeQuadros, economists at RDQ Economics. “We would not expect private payrolls to show as large a gain in April as seen in March.”