20 April 2011 17:33 [Source: ICIS news]
The National Association of Realtors (NAR) said that existing home sales in March rose to a seasonally adjusted annual rate of 5.1m units compared with the upwardly revised figure of 4.9m in February.
Although sales of existing homes last month were still 6.3% below the same month in 2010, the association noted that in March last year the housing market was at elevated levels due to a federal tax credit incentive that remained in force for the first quarter 2010.
NAR chief economist Lawrence Yun said the March sales data was good news, and he noted that “Existing home sales have risen in six of the past eight months, so we’re clearly on a recovery path”.
“With rising employment and excellent affordability conditions, we project moderate improvements into 2012, although not every month will show a gain”, he said.
Yun said that in any given month over the next half-year, existing home sales might be hampered by still tight mortgage lending policies.
NAR also said that 40% of existing home sales in March were for “distressed” residential properties, meaning those that had been foreclosed on and taken back by lenders.
Distressed properties typically sell for a price about 20% less than they otherwise might command because banks were anxious to get rid of foreclosed homes.
The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.
The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€11,040) worth of chemicals and derivatives used in the structure or in production of component materials.
While sales of existing homes do not directly benefit chemicals production nearly as much as new home construction, the market for new housing was not expected to see a significant recovery until the bloated inventory of existing homes for sale can be reduced.
NAR said that with the upturn in existing home sales last month, the inventory of properties for sale was at 3.55m units, which represents an 8.4-month supply at the current pace of sales. That was slightly lower than the 8.5-month inventory recorded for February.
In normal economic times, the inventory of unsold homes would be in the range of 4-6 months.
The NAR report on the improvement in existing home sales followed news from the US Commerce Department on Tuesday that new home construction rose by 7.2% in March.
However, confidence in the housing market among new home builders remains low, with a survey of contractors showing that they do not expect much improvement in sales over the next six months.
($1 = €0.69)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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