Sales of U.S. previously owned homes rose in March as a mounting supply of properties in or near foreclosure lured investors.

Purchases increased 3.7 percent to a 5.1 million annual rate, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. All-cash deals accounted for 35 percent of transactions, the most on record, the group said.

Unemployment, falling property values and stricter loan rules may push the number of households losing their homes to a record level this year, a sign the market will take time to recover. Even with last month’s gains, housing may remain a weak component in the economic recovery that began in June 2009.

“We continue to just tread water along the bottom,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “The housing market is fairly depressed. We think home prices will fall further.”

Stocks climbed as sales at companies from Intel Corp. to Yahoo! Inc. exceeded estimates and commodity producers gained. The Standard & Poor’s 500 Index rose 1.3 percent to 1,329.69 at 12:37 p.m. in New York.

Estimates for March existing home sales ranged from 4.59 million to 5.4 million, according to the median of 74 forecasts in the Bloomberg survey.

Paying Cash

The share of all-cash transactions is the highest since monthly tracking began in August 2008, Lawrence Yun, chief economist at the Realtors’ association, said at a news conference today in Washington. Yearly figures before 2008 showed the share at about 10 percent, Yun said.

Distressed properties, which include foreclosures and short sales, accounted for 40 percent of all deals last month, according to Yun. Purchases by investors climbed to 22 percent of transactions last month, up from 19 percent in February.

“This is part of the cleansing process that needs to occur,” Yun said, referring to distressed sales. “Home sales are strongest in the very-low price range” of less than $100,000, he said, reflecting the increase in demand by investors paying in cash.

Sales rose in three of four U.S. regions in March, led by an 8.2 percent gain in the South. The West fell 0.8 percent.

The median sales price fell 5.9 percent from March 2010 to $159,600 last month as less-expensive properties became a bigger share of the market. Sales of houses priced at $100,000 or less were up 9.6 percent from March 2010, compared with a 6.3 percent drop for the market as a whole, the report showed.

More Supply

The number of previously owned homes for sale climbed to 3.55 million. At the current sales pace, it would take 8.4 months to sell those houses compared with 8.5 at the end of the prior month. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.

Federal Reserve officials, in a statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.” The central-bank committee is scheduled to next meet April 26-27 in Washington.

Home prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said March 29.

Foreclosures

Some underlying home values are less than the mortgages on the properties. CoreLogic Inc. last month estimated that about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million existing homes already on the market.

Cheaper homes and distressed properties are making homebuilders pessimistic. Builders overall are not optimistic. The National Association of Home Builders’ confidence fell to 16 this month, according to the group’s gauge released this week. A reading under 50 means a majority of builders view conditions as poor.

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.

“We do not anticipate a net profit for 2011,” Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “The economy is continuing to improve. Even so, this recovery has yet to include significant job growth and has not spilled over into housing.” (Bloomberg)

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