US existing homes sales to remain moderately positive in coming months

US existing home sales performed better last month in comparison to February. Existing home sales in the country rose 5.2% m/m in Mach to 5.33 million units, slightly above consensus forecast of an increase to 5.28 million units. According to the report’s details, activity bolstered throughout the board. Single family segment showed most of the strength last month. The segment’s sales grew 5.5% m/m to 4.76 million. Meanwhile, the co-op and condo segment also grew slightly in March after posting declines in January and February.

Sale of inventory of homes grew 5.9% last month, growing at a more rapid rate than that of home sales. The inventory-to-sales ratio rose 0.1 to 4.5. The total inventory of house for sale is still lower by 1.5% from previous year’s level in spite of the monthly rise in the total number of houses registered for sale. Meanwhile, sales of homes also took place rapidly. The median home price rose from 5.1% y/y in February to 5.7% y/y in March. Prices of single family segment rose 5.8% y/y, whereas those of co-op and condo prices grew 4.6% y/y.

The existing housing market seems to be coming back after posting declines in the first two months of 2016. Residential investment is getting the required stimulus from higher brokers’ commissions and activity in Q1 2016. Residential investment is likely to grow by almost 10% q/q in the first quarter, according to TD Economics.  Furthermore, March’s strong data will lead to a much better start for the growth in second quarter, which will aid the economy to grow closer to an annualized rate of 2% in Q2 from a weaker growth of 0.8% in Q1.

The existing home sales growth is likely to remain moderately positive in the following months, noted TD Economics. The housing market’s overall outlook continues to be favorable. The market is underpinned by stable growth in labor market that will result in the rebound in the household formation rate and household finances, added TD Economics. The interest rates are also likely to be low for a longer time that will maintain low borrowing costs due to the cautious stance of the US Fed.