WASHINGTON – U.S. home resales rose in October to their highest level in more than 9-1/2 years amid pent-up demand, offering more evidence of a pickup in economic growth early in the fourth quarter.
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While a recent surge in mortgage rates could hurt the housing market next year, the impact is likely to be modest given a labor market that is at or close to full employment.
The National Association of Realtors said on Tuesday existing home sales increased 2.0 percent to an annual rate of 5.6 million units last month, the highest level since February 2007. September's sales pace was revised up to 5.49 million units from the previously reported 5.47 million units.
Economists polled by Reuters had forecast sales slipping 0.5 percent to a 5.43 million-unit pace in October. The NAR attributed the surprise rise in sales last month to "unrealized pent-up demand" after would-be buyers were held back by tight supply over the summer.
Sales were up 5.9 percent from a year ago. Last month, existing home sales rose in all for regions.
The report came on the heels of data last week showing a surge in housing starts. It also added to strong reports on retail sales and the labor market as well as improving manufacturing surveys in suggesting that the economy continued to gain speed early in the fourth quarter.
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The Atlanta Federal Reserve is forecasting gross domestic product rising at a 3.6 percent annual rate in the fourth quarter. The economy grew at a 2.9 percent pace in the July-September period.
The dollar extended gains versus the yen on the existing home sales report, while prices for U.S. government bonds were little changed. U.S. stocks were trading at record highs, with the PHLX housing index rising 0.2 percent.
SUPPLY REMAINS TIGHT The NAR said it expected home resales to average 5.36 million units this year. Despite last month's surprise rise, existing home sales remain constrained by a persistent shortage of properties available for sale.
Sales could slow marginally early next year following a run-up in mortgage rates in the wake of this month's election of Republican candidate Donald Trump as the next president.
Trump's surprise victory has led to a surge in U.S. government bond yields amid investor concerns that the business mogul's proposed expansionary fiscal policy agenda could fan inflation.
Mortgage rates closely track movements in U.S. Treasury yields. Since the Nov. 8 presidential election, the fixed 30-year mortgage rate has increased nearly 40 basis points to average 3.94 percent, according to data from mortgage finance firm Freddie Mac.
Both economists and the Realtor group, however, believe the impact on home sales would be modest provided the labor market continues to strengthen. The NAR is forecasting existing home sales increasing to about 5.46 million units next year.
Housing is being supported by improving household formation as the tightening labor market boosts employment prospects for young adults, as well as older Americans downsizing into smaller and cheaper homes.
The dearth of homes for sale is keeping upward pressure on house prices, sidelining some first-time buyers. The median house price rose 6.0 percent from a year ago to $232,200 last month.
The number of unsold homes on the market slipped 0.5 percent from September to 2.02 million units. Supply was down 4.3 percent from a year ago and had declined for 17 straight months on a year-on-year basis.
At October's sales pace, it would take 4.3 months to clear the stock of houses on the market, down from 4.4 months in September. A six-month supply is viewed as a healthy balance between supply and demand.
In October, new listings typically stayed on the market for 41 days. That was up from 39 days in September, but down from 57 days a year ago. Economists say builders will need to ramp up construction of new homes to meet the pent-up demand. House price increases are outstripping wage gains. While that could make home purchasing expensive for first-time buyers, it is raising equity for homeowners and enticing some to put their homes on the market.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)