Jan. 26 (Bloomberg) -- Purchases of new houses in the U.S. rose more than forecast in December, propelled by a record surge in the West as buyers in California may have rushed to qualify for a state tax credit before it expired.
Sales climbed 18 percent to a 329,000 annual pace, figures from the Commerce Department showed today in Washington. The percentage gain was the biggest since 1992, and was led by a record 72 percent jump in the West.
“The increase being driven by the West definitely looks suspicious,” said Daniel Silver, an economist at JPMorgan Chase & Co. in New York. “New-home sales are definitely lagging behind other economic indicators. As we see job growth and signs of economic stability, the housing market will improve, but when that will happen is hard to say.”
Following the industry’s worst year on record, builders may keep facing competition from a growing glut of foreclosed existing homes that is depressing prices. The lack of a sustained housing rebound and unemployment above 9 percent are among reasons Federal Reserve policy makers today said they’ll press on with a second round of stimulus that will pump $600 billion into financial markets by June.
Stocks rose after the report and the Fed’s monetary policy meeting, with the Standard & Poor’s 500 Index gaining 0.4 percent to 1,296.63 at the 4 p.m. close in New York. The S&P Supercomposite Homebuilder Index increased 1.5 percent.
The median estimate of 79 economists surveyed by Bloomberg News called for a rise to 300,000. Estimates ranged from 270,000 to 315,000. Last month’s sales pace was the highest since April. The Commerce Department revised November purchases down to 280,000 from a previously reported 290,000 rate.
Buyers of new houses in California could qualify for a tax incentive worth as much as $10,000 if they signed a contract between May 1 and the end of 2010, and close the deal by Aug. 1. Sales of new houses are based on contract signings rather than closings.
California allocated $100 million to the program and there is a three- to four-month backlog in applications, Daniel Tahara, a public affairs spokesman with the state’s Franchise Tax Board, said in an interview. In some cases, the state received as many as five applications from the same buyer, so it will take months to determine how many people ultimately receive the credit before the program’s funds are depleted, Tahara said.
“The upshot is that December’s new-home sales data provide a misleadingly optimistic picture of demand,” Paul Dales, senior U.S. economist for Capital Economics Ltd. in Toronto, said in a note to clients. “At best, the underlying trend remains flat.”
For all of 2010, sales fell 14 percent nationally from the prior year to 321,000, the fewest in data going back to 1963.
Purchases climbed in three of four U.S. regions last month. Sales in the Northeast decreased 5 percent.
The median sales price rose 8.5 percent in December from the same month in 2009, to $241,500, today’s report showed. The increase in values probably reflects the change in the mix of sales toward the West where prices are generally higher.
The supply of homes at the current sales rate fell to 6.9 month’s worth, the lowest since April, from 8.4 months in November. There were 190,000 new houses on the market at the end of December, the fewest since January 1968.
Previously owned home purchases jumped more than forecast in December as buyers tried to lock in low mortgage rates before the economic recovery pushed borrowing costs up even more, figures from the National Association of Realtors showed last week. Existing house purchases are calculated when a contract closes.
National Tax Credit
Housing demand gyrated last year, reflecting a boost from a national home buyer tax incentive of as much as $8,000 that gave way to a plunge in sales by mid-2010 after the credit ended.
With sales yet to show sustained strength, builders have cut back on the new-home supply. Housing starts fell in December to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed last week.
An unemployment rate that is slated to average more than 9 percent again this year signals some homeowners will keep having trouble meeting mortgage payments, leading to an increase in distressed properties. The number of homes getting a foreclosure filing will rise about 20 percent this year, reaching a peak for the housing crisis, said RealtyTrac Inc., an Irvine, California-based data seller.
Prices remain under pressure, hurting homeowner equity while at the same time improving affordability. The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from the prior year, the biggest 12-month decrease since December 2009, a report from the group showed yesterday.
Horsham, Pennsylvania-based Toll Brothers Inc., the largest U.S. luxury-home builder, is among companies concerned about foreclosures in markets like Las Vegas and Phoenix, even as it is “optimistic” about the upcoming spring selling season, according to Martin Connor, chief financial officer.
“I don’t think it’s quite turned the corner yet,” Connor said in a Bloomberg Television interview on Jan. 5, referring to the housing industry. Still, general positive economic news including an increase in retail sales “bodes well for the housing market,” he said.
While signs such as improving consumer confidence indicate the world’s largest economy is gaining speed, Fed Chairman Ben S. Bernanke and his fellow policy makers said today they will complete the second round of quantitative easing to keep borrowing costs low and spur growth.
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