Sales of new U.S. houses in February capped the best back-to-back months in more than four years, spurred by near record-low borrowing costs and improving job prospects.
Purchases of newly built homes fell 4.6 percent to a 411,000 annualized pace, following a 431,000 rate in the prior month that was lower than previously estimated, the Commerce Department reported today in Washington. The median estimate of 78 economists surveyed by Bloomberg called for a decrease to 420,000. It was the best two-month showing since August and September 2008.
The increase in demand is contributing to growth as it ripples through the economy, boosting home-improvement retailers, appliance and furniture makers and builders including KB Home and Lennar Corp. At the same time, still-restrictive lending rules and a lack of available land on which to work may keep a lid on how fast the housing rebound unfolds.
“Housing is going to have a strong year this year and it’s going to have a strong year next year,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, who projected sales would drop to a 410,000 pace. “Housing is one of the key factors that’s going to get the economy back on track.”
Economists’ estimates ranged from 397,000 to 454,000 after a previously reported 437,000 pace in January.
The median sales price increased 2.9 percent in February from the same month last year, to $246,800, today’s report showed.
Residential real estate prices in 20 cities increased 8.1 percent in January from the same time last year, the biggest 12-month gain since June 2006, according to data from S&P/Case-Shiller issued today. The advance exceeded the 7.9 percent median forecast by economists in a Bloomberg survey.
Also today, another report from the Commerce Department showed orders for durable goods climbed more than forecast in February, propelled by automobiles and a rebound in commercial aircraft.
A report from the Conference Board, a New York-based research group, showed consumer confidence slumped more than forecast this month as views about the future dimmed, other figures showed today. The consumer confidence index dropped to 59.7 from 68 in February.
Stocks held earlier gains after the reports. The Standard & Poor’s 500 index climbed 0.6 percent to 1,560.73 at 10:15 a.m. in New York.
Purchases on new homes eased in three of four U.S. regions, led by a 13.3 percent drop in the Northeast, according to the Commerce Department. Sales in the Midwest climbed 13.7 percent.
The supply of homes at the current sales rate rose to 4.4 months from 4.2 months in January. There were 152,000 new houses on the market at the end of the month, up from 150,000 in January.
Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final. New construction accounted for about 7 percent of the residential market in 2012.
Existing homes sold a 4.98 million annualized pace in February, up 0.8 percent from the prior month, the National Association of Realtors reported last week. The number of properties on the market climbed to 1.94 million from 1.77 million in January, the first gain in supply in almost a year.
KB Home is among companies buying land in anticipation of increased demand. The Los Angeles-based builder nearly doubled its spending, to almost $350 million, on land acquisition and development in the first quarter, and has been raising prices, Chief Executive Officer Jeffrey Mezger said.
“There is no question we expect continuous strong growth,” Mezger said on a March 21 earnings call. “We have a lot of upside in every market that we’re in, and they’re now all recovering and there’s opportunities in every city.”
Near record-low borrowing costs are helping keep properties affordable. The average rate on a 30-year, fixed-rate purchase loan was 3.54 percent last week, compared with 4.08 percent a year ago, according to McLean, Virginia-based Freddie Mac. The 30-year rate reached a record-low 3.31 percent in November.
In other signs of improvement, builders broke ground on more houses in February, with starts climbing 0.8 percent to an annualized rate of 917,000 a year, the Commerce Department reported last week. Residential construction permits, a proxy for future work, jumped 4.6 percent to a 946,000 pace, the most since June 2008.
“We are still in the beginning stages of a recovery that will be sustained for several more years,” Stuart Miller, chief executive officer of Miami-based Lennar Corp., said on a March 20 earnings call. “As the housing market continues its overall trajectory back to normal, it will provide stimulus to the overall economy through job creation and building long-term consumer wealth,” Miller said.
First-time buyers also returned to the housing market for the second consecutive month in February, accounting for 34.5 percent of transactions based on a three-month average, according to a Campbell/Inside Mortgage Finance HousingPulse Tracking Survey released yesterday. As a share of the market, first-time buyers were 32.9 percent in December, a four-year low, the survey found.
Delinquencies remain a hurdle to the industry’s rebound. Foreclosure filings rose 2.3 percent in February from a month earlier, to almost 154,300, according to RealtyTrac, an Irvine, California-based data provider.