Home resales nationwide jumped more than expected in December and claims for new jobless claims last week posted their biggest decline in nearly a year, showing two key economic trouble spots on the mend.
The raft of positive data on Thursday renewed hope that 2011 growth will surpass last year’s performance, which was not robust enough to put a meaningful dent in the nation’s elevated 9.4 percent unemployment rate.
"Most of the reports today were fairly good. For anyone skeptical about the U.S. recovery, these should ease concern," said Kathy Lien, director of research at GTF Forex in New York.
Existing home sales nationwide soared 12.3 percent to an annual rate of 5.28 million units as sellers cut prices, the National Association of Realtors (NAR) said. Economists had only expected a rise to 4.85 million. Still, a rise in distressed sales raised questions about the rebound’s sustainability.
Applications for new jobless benefits posted their biggest decline in nearly a year, pointing to steady if slow improvement in the labor market. Claims retreated to 404,000 from 441,000 in the prior week, the Labor Department said.
The U.S. economy has been growing for a year and a half but the pace of growth has not been enough to significantly lower unemployment, which stood at 9.4 percent in December.
A weak job market could thwart housing activity further by denting consumer confidence.
That’s part of the reason Federal Reserve officials, who will meet next week to discuss monetary policy, made a controversial commitment in November to purchase an additional $600 billion in government bonds to support the recovery.
The rebound in home sales came despite a bout of bad winter weather across many parts of the country last month.
A jump in the nation’s mortgage rates may have forced some buyers into the market by raising concern of even further increases, said Lawrence Yun, NAR chief economist. Yun said he expects 2011 sales to total around 5.2 million units, with prices remaining stable.
Some economists were skeptical of the rise. Median home prices nationwide in December fell to $168,800, down from $170,200 in November and the lowest since February 2010. That was in part because properties considered "distressed" accounted for 36 percent of sales, up from 33 percent in November.
"It is quite possible the big increase reflects foreclosed properties and short sales," said Mark Vitner, senior economist at Wells Fargo in Charlotte, N.C. "Banks likely wanted them off their books toward the end of year. There does not seem to be a whole lot of momentum in the housing sector and we will not see much improvement until we move past this mountain of foreclosures."
Faulty documentation in a loosely regulated housing market has led to disputes over foreclosures, creating a backlog that could flood the market with new inventory.
For now, the market appeared to be making progress in reducing the stock of housing, with the available supply of homes for sale falling sharply in December to 8.1 months’ worth from 9.5 months’ worth in November.
Sales peaked above an annual rate of 7 million units in September 2005 as the housing bubble reached fever pitch. They hit a 15-year low below 4 million units in mid-2010 after the market collapsed, triggering a widespread financial crisis. For 2010 as a whole, sales were down 2.9 percent. (Reuters)
