Sales of New Homes in U.S. Climb More Than Forecast
Demand for new U.S. homes rose more than forecast in April, indicating residential real estate may contribute to economic growth for the first time in seven years.
Purchases rose to a 343,000 annual rate, up 3.3 percent from a revised 332,000 in March, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 72 economists was 335,000. Data yesterday showed April sales of previously owned homes rose in every region.
“It’s very clear now that the housing market has turned a corner,” said Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston, who projected sales would increase to a 339,000 pace. “The only question is how strong the rebound is going to be. It bodes well for the broader economy.”
Job growth, improving affordability and record-low interest rates are helping propel sales at builders such as Toll Brothers Inc. At the same time, some banks remain reluctant to lend and foreclosures continue to move through the system, signaling a sustained housing recovery will take time to take hold.
Stocks erased earlier losses amid optimism European leaders will do more to halt contagion from the region’s debt crisis, helping the market reverse a plunge triggered by growth concern Greece will leave the euro. The Standard & Poor’s 500 Index rose 0.2 percent to 1,318.86 at the close in New York.
Elsewhere today, Bank of England policy makers kept open the possibility that they may resume stimulus, saying a decision to halt bond purchases this month was “finely balanced” because of risks from the euro area.
In another sign the U.S. housing market is gaining traction, a report from the Federal Housing Finance Agency today showed home prices rose 2.7 percent in the 12 months through March, the biggest year-over-year gain since November 2006. Values increased in every region, led by a 4 percent jump in the area that includes Texas and Louisiana.
Bloomberg survey estimates for new-home sales, which are logged when contracts are signed, ranged from 325,000 to 375,000. The Commerce Department revised the March reading up from a previously estimated 328,000.
The median sales price increased 4.9 percent from the same month last year, to $235,700, today’s report showed.
Purchases rose in three of four U.S. regions last month, led by 28 percent gains in both the Midwest and West. The South was the only area to show a decline, falling 11 percent.
The number of newly constructed houses on the market rose to 146,000 from 144,000 in March, which was the fewest reported in data going back to 1963. It was the first increase in inventory since April 2007.
Because the rate of sales climbed faster than inventory, the supply of new houses on the market dropped to 5.1 months’ worth from 5.2 months in March.
Demand for new houses peaked at 1.28 million in 2005 during the housing boom, then fell to 306,000 in 2011, the lowest in records dating back to 1963.
Newly constructed houses made up 6.7 percent of the residential market last year, down from a high of 15 percent during the boom of the past decade. Some buyers are taking advantage of the large inventory and affordability of previously owned homes.
Sales of those existing homes, tabulated when a contract closes, increased 3.4 percent to a 4.62 million annual rate in April, just shy of the 4.63 million in January that was the highest in almost two years, the National Association of Realtors reported earlier this week. Resales could rise to a 4.6 million to 4.7 million range this year, the group projected, from 4.26 million in 2011.
Builder confidence rose to a five-year high in May, with the National Association of Homebuilders/Well Fargo sentiment gauge rising to 29. The measure had been as low as 14 in September. A measure of sales expectations for the next six months rose to 34 from a revised 31, and the gauge of buyer traffic increased to 23, the highest since April 2007, homebuilders reported earlier this month.
Toll Brothers (TOL), the largest U.S. luxury-home builder, today reported a second-quarter profit that beat estimates as sales and orders increased amid improving demand for the company’s move-up houses. Toll’s homes are marketed to wealthier buyers with easier access to cash and credit. Bookings jumped 47 percent from a year earlier to 1,290 homes.
“It appears that the housing market has moved into a new and stronger phase of recovery,” Chief Executive Officer Douglas Yearley said in a statement. “The spring selling season has been the most robust and sustained since the downturn began.”
Builders broke ground on more homes than anticipated in April, a Commerce Department report showed earlier this month. Housing starts rose 2.6 percent to a 717,000 annual rate.
The last time residential construction contributed to economic growth was in 2005, when it accounted for 0.4 percentage point of the 3.1 percent increase in gross domestic product. From 2006 through 2009, the homebuilding slump subtracted 0.8 percent point from growth on average. The declines diminished over the past two years.
Lower borrowing costs are helping underpin demand. The average cost of a 30-year, fixed-rate mortgage fell to 3.79 percent last week, an all-time low, according to a Freddie Mac survey of lenders.
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