Consumers to factories point to durable U.S. expansion

Consumers and companies are starting to act as if the economic expansion is here to stay.

Purchases of new homes jumped in May to a five-year high, while business investment plans improved for a third straight month, figures from the Commerce Department showed today in Washington. The last time households were this confident was in January 2008, according to another report.

The data point to the self-sustaining expansion the Federal Reserve is seeking to nurture as rising property values boost household wealth and spending, while businesses invest in new equipment to meet growing demand. Stocks climbed, with the Standard & Poor’s 500 index rebounding from a nine-week low, as the figures supported forecasts the economy will overcome a mid- year slump and accelerate in the second half of 2013.

“It’s all good news,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “The economy is going to gain traction.”

The S&P 500 climbed 0.9% at 1,587.61 at 1:07 p.m. in New York. Treasuries fell, pushing the yield on the benchmark 10-year note up to 2.60% from 2.54% late yesterday, as the data boosted the case for the Fed to slow bond purchases later this year.

Builders sold 476,000 new properties at an annualized rate last month, a 2.1% gain from April, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department figures showed. The median selling price climbed to $263,900, up 10.3% from May 2012.

Builder Earnings

Lennar Corp. is among builders seeing increased sales, orders and higher average purchase prices. The third-largest U.S. homebuilder by revenue today reported second-quarter earnings that beat analysts’ estimates.

Miami-based Lennar delivered 4,464 houses, compared with 3,222 homes a year earlier, while the average sales price increased to $283,000 from $250,000. Orders rose 27%.

“Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second-quarter results together with real-time feedback from our field associates continue to point towards a solid housing recovery,” Chief Executive Officer Stuart Miller said in the statement.

Values of existing properties are also picking up. Home prices in 20 U.S. cities rose 12.1% in April from the same month in 2012, the biggest year-over-year gain since March 2006, a report from S&P/Case-Shiller showed. The 1.7% increase in April from the prior month followed a 1.9% March advance, marking the biggest back-to-back gains since records began in 2000.

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