Purchases of new homes in the U.S. rose more than projected in April, a sign this part of the market is picking up steam during the busiest selling period of the year.
Sales increased 6.8 percent to a 517,000 annualized pace from a 484,000 rate in the prior month, figures from the Commerce Department showed Tuesday in Washington. The median forecast of 70 economists surveyed by Bloomberg called for 508,000. Prices picked up and inventory was little changed.
Steady hiring, low borrowing costs and a limited supply of existing homes is helping lift demand for new properties. Housing-related companies from PulteGroup Inc. to Home Depot Inc. have said the spring selling season is off to a good start, and the brighter outlook for sales may spur more residential construction, which would contribute to economic growth.
“Housing is coming back after a bad winter period,” said Robert Brusca, president of Fact & Opinion Economics in New York, whose forecast for sales was among the closest of economists surveyed by Bloomberg. “There’s going to be an improving housing market, but a slowly improving one.”
Other reports Tuesday showed U.S. business investment could pick up in the second half of the year, prices of existing homes also climbed and consumer confidence improved.
Bookings for non-military capital goods excluding aircraft, a proxy for future corporate spending on new equipment, advanced 1 percent after a 1.5 percent gain in March that was larger than previously estimated, according to data from the Commerce Department.
The S&P/Case-Shiller index of property values in 20 cities increased 5 percent in March from the same month last year, the group said. Nationally, prices rose 4.1 percent from March 2014.
The Conference Board’s consumer-confidence index increased to 95.4 in May from a revised reading of 94.3 the month before, the New York-based private research group said.
Stocks fell the most in three weeks, as the better-than-forecast economic data and comments by Federal Reserve officials bolstered bets for an interest-rate increase this year. The Standard & Poor’s 500 Index dropped 0.7 percent to 2,110.47 at 10:10 a.m. in New York.
Economists’ estimates for new-home sales ranged from 480,000 to 540,000. The reading for the prior month was previously reported as 481,000.
The median sales price increased 8.3 percent from April 2014 to $297,300, the report showed.
Purchases rose in two of four U.S. regions, led by a 36.8 percent surge in the Midwest, the biggest jump since October 2012, pointing to a rebound from harsh winter temperatures the month before.
The supply of homes at the current sales rate fell to 4.8 months from 5.1 months in March. There were 205,000 new houses on the market at the end of April compared with 204,000 the prior month.
New-home sales account for about 8 percent of the residential market and are tabulated when contracts are signed. They are considered a timelier barometer than purchases of previously owned dwellings. The latter are calculated when a contract closes, typically a month or two later.
Contract closings dropped 3.3 percent to a 5.04 million annualized rate in April after a 5.21 million pace that was the strongest in almost two years, the National Association of Realtors reported on May 21. The median price of an existing home climbed 8.9 percent from a year earlier, the biggest 12-month gain since January 2014, while the number of properties on the market fell from the same time last year.
Federal Reserve Chair Janet Yellen, speaking on May 22 in Providence, Rhode Island, noted home prices are recovering and said population growth is creating a need for more housing. Nevertheless, credit remains tight for some would-be homeowners and “activity in the housing sector is likely to improve only gradually,” she said.
The improving job market remains a support for housing demand. The unemployment rate fell in April to 5.4 percent, the lowest since May 2008, according to the Labor Department. Payrolls climbed by 223,000 after an 85,000 in March. Hourly pay was up 2.2 percent over the past 12 months, holding in the narrow range tracked over the past four years.
Buyers are getting help from low borrowing costs during the housing market’s busiest time of the year. The average 30-year, fixed-rate mortgage fell to 3.84 percent in the week ended May 21, close to the level at the start of 2015 and well below last year’s high of 4.53 percent in early January 2014, according to data from Freddie Mac in McLean, Virginia.
Recent growth in demand is feeding into homebuilding. Housing starts soared in April to a 1.14 million annualized rate, the most since November 2007, Commerce Department figures showed last week. More permits, a proxy for future construction, were issued than at any time since June 2008.
Companies that are optimistic include D.R. Horton Inc., the largest U.S. homebuilder by revenue, and PulteGroup Inc., the third-largest U.S. homebuilder.
“The spring selling season at D.R. Horton is off to a strong start,” Chairman Donald R. Horton said in an April 22 statement.
The company’s earnings in the second quarter ended March 31 rose as sales increased, and it said its entry-level Express Homes division may make up a greater share of sales.