Purchases of new U.S. homes rose more than projected in July to match a two-year high, a sign the industry that helped trigger the recession is recovering.
Sales climbed 3.6 percent to a 372,000 annual pace, following a 359,000 rate in June that was higher than previously estimated, figures from the Commerce Department showed today in Washington. Last month’s rate was the same as in May, which was the strongest since April 2010. The median forecast of 72 economists surveyed by Bloomberg called for a rise to 365,000.
Buyers are returning to the market to take advantage of cheaper properties and record-low mortgage rates, helping to boost orders at builders like Toll Brothers Inc. Competition from foreclosures, unemployment exceeding 8 percent and limited credit pose hurdles to a more pronounced rebound, one reason Federal Reserve policy makers are monitoring housing data.
“The new-home market is clearly signaling a steady and fairly strong recovery,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “Demand should continue to climb right on into 2013.”
Stocks held earlier losses after the report. The Standard & Poor’s 500 Index fell 0.6 percent to 1,404.73 at 10:17 a.m. in New York.
Estimates of economists surveyed ranged from 340,000 to 400,000. June’s reading was previously reported as 350,000.
The number of Americans filing applications for unemployment benefits climbed last week to a one-month high, showing little progress in the labor market, another report today showed. Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed. The median forecast of 41 economists surveyed by Bloomberg called for 365,000.
Sales of new houses were up 25 percent from a year ago, today’s report from the Commerce Department showed. The median price for a new house decreased 2.5 percent in July from the same month last year, to $224,200.
The value of all U.S. homes climbed 1.8 percent in the second quarter from the previous three months, the biggest gain since late 2005, a report from the Federal Housing Finance Agency also showed today.
Purchases rose in two of four regions last month, led by a 77 percent surge in the Northeast, making up for a 55 percent plunge in June, the Commerce Department report showed. Sales climbed 7.7 percent in the Midwest, and fell 1.6 percent in the South and 0.9 percent in the West.
The supply of homes at the current sales rate dropped to 4.6 months from 4.8 months in June. There were 142,000 new houses on the market at the end of July, the fewest in data going back to 1963.
Sales of new homes, tabulated when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade.
Existing-home sales rose to a 4.47 million annual rate in July from an eight-month low the prior month, the National Association of Realtors reported yesterday. Restrictive lending rules, a lack of inventory and lingering unemployment may be preventing a rebound to the 5 million to 5.5 million sales pace that the real-estate group’s said signals a “normal” market.
The NAR figures also showed distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 24 percent of existing-home purchases. The share was less than the prior month and down from 29 percent in July 2011. Of those, 12 percent were foreclosed houses and 12 percent were short sales.
Companies benefiting from rising demand include Bloomfield Hills, Michigan-based PulteGroup Inc., the largest U.S. homebuilder by revenue, which posted a 32 percent jump in second-quarter orders. Toll, the largest U.S. luxury-home builder, yesterday reported a better-than-estimated profit and an increase in revenue for the fiscal third-quarter.
“We are enjoying the most sustained demand we’ve experienced in over five years,” Douglas Yearley Jr., chief executive officer of Horsham, Pennsylvania-based Toll, said in a statement. “Customers who have postponed buying for a number of years are moving into the market.”
Borrowing costs continue to aid home buyers. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac.
Among other signs of improvement, residential construction permits, a proxy for future work, jumped to a four-year high in July. The National Association of Home Builders/Wells Fargo index of builder confidence rose in August to the highest level since 2007.
Fed officials assessed that “conditions in the housing sector appeared to have improved somewhat, but from a very low level,” according to minutes of the central bank’s July 31-Aug. 1 meeting released yesterday.
Many of the policy makers also said additional stimulus would “likely be warranted fairly soon” unless the economy shows signs of a durable pickup, according to the text.