A surprisingly warm weather, low mortgage rates and an overall positive economic outlook will likely drive the US existing home sales up for March.
The existing home sales for February were reported at 4.59 million by the National Association of Realtors (NAR). Economists estimate the sales for March to cross the 4.60 million mark. After a mild winter, the spring home buying season looks cheerful as home contracts increase.
“If activity is sustained near present levels, existing-home sales will see their best performance in five years,” said Lawrence Yun, NAR chief economist in a press statement. “Based on all of the factors in the current market, that’s what we’re expecting with sales rising 7 to 10 percent in 2012.”
Although home sales have been flattish since the beginning of the year, they have improved from extremely depressed levels since the second half of 2010, says Thomas Lam, chief economist at the OSK-DMG group, based in Singapore.
“I’m expecting existing home sales to come-in at 4.62 million units in March,” said Lam.
He attributes the possible increase to other macro-economic conditions, which remain positive. Low interest rates are also encouraging home buying says Lam.
“The gradual improvement in home sales partly reflects the continued, though uneven, recovery in the labor market, conducive levels of mortgage rates and some less uncertainty over the economic outlook,” Lam said.
The bout of strong housing numbers is also a seasonal phenomenon says Dr. Mike Englund, principal economist at Action Economics.
“The first quarter performance is always encouraging, but the activities might slow down in the second quarter as the seasonal effects wear off,” said Dr. Englund.
He expects the home sales will increase by around 3.5 percent and will go up to 4.75 million units.
A considerable proportion of the sales will continue to be distressed sales. In February the distressed sale component was around 34 percent from the total home sales. And it will still take at least two years for this toxic inventory to clear out from the market.
While the housing indicators continue to show strong signals that the market is on its way to recovery, some factors like the large supply of homes and government policies might prevent it from a fast recovery.
“The overall excess supply of homes and the lack of uniformity on housing-specific government policy will continue to hold back the recovery in the housing market,” said Lam about the future outlook of the US housing market.