Purchases of new houses rose in April for a second month as the market struggled to recover from a record low.
Sales climbed 7.3 percent to a 323,000 annual pace last month, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for sales at a 300,000 annual rate. New houses sold at a 278,000 rate in February, matching the pace in August as the lowest in data going back to 1963.
Job gains and increased affordability may be starting to help underpin a housing market that’s lagged behind the rest of the economy. Nonetheless, the prospect that foreclosures will keep driving down property values means that buyers may continue to favor previously owned dwellings, indicating it will take years for builders like D.R. Horton Inc. to see a full recovery.
“We’re looking at a modest upward trend, with some bouncing around at this level,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “Housing will bounce around near these levels in terms of new and existing sales, with a bit of further declines in prices. We should see a pickup later in the year.”
Another report today showed manufacturing, which led the economy out of the recession, may be cooling. The Federal Reserve Bank of Richmond’s factory index dropped to minus 6 this month, the lowest reading since April 2009. Negative numbers indicate manufacturing was shrinking.
Stocks fell, led by declines in automobiles and industrials. The Standard & Poor’s 500 Index decreased 0.1 percent to 1,316.28 at the 4 p.m. close in New York. The S&P Supercomposite Homebuilding Index dropped 0.8 percent.
Estimate in the Bloomberg survey of 75 economists ranged from 280,000 to 320,000. Sales in March were revised to a 301,000 annual rate from a 300,000 previously reported.
The median sales price increased 4.6 percent from the same month last year, to $217,900, today’s report showed.
The gain may reflect a change in the mix of sales to higher-priced homes in the West, where demand jumped 15 percent. The other three regions also saw purchases increase.
The supply of homes at the current sales rate dropped to 6.5 month’s worth in April, the lowest in a year, from 7.2 months in March. There were 175,000 new houses on the market at the end of April, the fewest since records began in 1963.
Building executives are still concerned about the outlook. Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of Fort Worth, Texas-based D.R. Horton Inc., the second-largest U.S. home builder by revenue. “We feel it could still be a struggle in 2012.”
Builders are cutting back as a result. Housing starts fell 11 percent in April to a 523,000 annual pace, the second-weakest reading since April 2009’s record low, figures from the Commerce Department showed last week.
One reason for the slump is growing interest from investors in buying distressed properties. Previously owned homes sold at a 5.05 million annual rate in April, down 0.8 percent from the prior month, data from the National Association of Realtors showed May 19. All-cash deals accounted for 31 percent of transactions, and distressed properties, including foreclosures and short sales, made up 37 percent, the group said.
As distressed transactions have played a bigger role, new-home sales have shrunk as a share of total sales. They accounted for just under 6 percent of the market in March, down from 16 percent at their peak in July 2005.
The supply of existing houses will probably remain an issue. CoreLogic Inc. in March estimated about 1.8 million homes were more than 90 days delinquent, in foreclosure or bank-owned, a so-called “shadow inventory” set to add to the unsold supply of 3.87 million previously owned homes already on the market.
Foreclosures have weighed on home prices. The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent in February from a year earlier, the biggest 12-month decrease since November 2009, the group said last month. The gauge is down 33 percent from its July 2006 peak.
In addition to the drop in values, persistent joblessness may be making some potential buyers hesitate. The 9 percent unemployment rate last month, almost two years into an economic recovery, compares with an average of 4.8 percent in the three years before the recession began.
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc., the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”