Builders sold more U.S. new homes than projected in April as cheaper borrowing costs and job gains drew more buyers into the market.
Sales climbed 2.3% to a three-month high of 454,000 homes at an annualized pace from a 444,000 rate in March that was faster than first estimated, the Commerce Department said today in Washington. The median estimate of 76 economists surveyed by Bloomberg called for a gain to 425,000. The data included revisions back to January 2011. The median selling price rose to a record on sales of more expensive properties.
Demand for new and previously owned homes is sustaining progress in residential construction that is poised to keep fueling the economic expansion. Builders such as PulteGroup Inc., home-improvement retailers like Lowe’s Cos. and lenders are benefiting from higher property values, lower mortgage rates and a pickup in household formation.
“In terms of growth, housing is the strongest part of the economy right now,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. “As employment continues to recover, household formation should recover. Right now both trends look positive.”
Stocks held losses after the figures as data showed Chinese manufacturing unexpectedly shrank. The Standard & Poor’s 500 Index dropped 0.9% to 1,640.73 at 10:05 a.m. in New York.
Economists’ estimates ranged from 406,000 to 440,000 after a previously reported 417,000 pace in March.
The median selling price increased 14.9% in April from the same month last year to a record $271,600, today’s report showed. The gain reflected increases in sales of homes costing $400,000 or more. Purchases of homes priced less than $300,000 decreased.
Purchases rose in two of four U.S. regions, led by a 10.8% jump in the West. Sales in the South rose, while purchases dropped in the Northeast and Midwest.
The supply of homes at the current sales rate held at 4.1 months. There were 156,000 new houses on the market at the end of the month, the most since October 2011.
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-home sales accounted for about 7% of the residential market in 2012.
Purchases of previously owned homes climbed in April to the highest level in more than three years, to an annual rate of 4.97 million, the National Association of Realtors reported yesterday. The median price of a property rose 11%, to $192,800, from a year earlier. It was the fifth consecutive month that property values advanced more than 10% year over year, the data show.
Demographic shifts are helping fuel growing demand. More young people are forming households and retirees are moving into new homes, according to Robert O’Shaughnessy, chief financial officer at Bloomfield Hills, Michigan-based PulteGroup, the largest U.S. homebuilder by revenue.
“There is a limited number of units on the ground,” O’Shaughnessy said at a May 21 conference. “In many markets you’ve got below three months’ supply of actual housing available for sale. So when folks are actually out shopping, new becomes an even better alternative, being it’s one of the only things around.”
Confidence among homebuilders improved in May as prospective buyer traffic picked up along with sales, a report showed last week. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 44 from a revised 41 in April, the Washington-based group said.
The average rate on a 30-year fixed mortgage was 3.59% this week, down from 3.78% a year earlier, according for data from Freddie Mac. The rate reached a record low of 3.31% in November.
Record monetary stimulus from the Federal Reserve is helping keep borrowing costs low. Chairman Ben S. Bernanke yesterday signaled little appetite for paring the central bank’s bond purchase program.
“A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke told the Joint Economic Committee of Congress in Washington.
Further progress in housing may be gradual as as Americans begin to feel the effects of higher taxes that took effect in January at the same time government budget cuts take hold, Lowe’s Chairman and Chief Executive Office Robert Niblock said.
“The housing market continues to show convincing signs of life,” Niblock said on a May 22 earnings call. “However, growth in other key indicators, particularly employment, slowed in the first quarter. We expect growth to remain modest through mid-year as consumers adjust to higher taxes and the fiscal drag intensifies.”