Sales of new U.S. homes climbed more than forecast in May to the highest level in almost five years, a sign of continued strength in a market that’s helping fuel economic expansion.
Purchases rose 2.1% to an annualized pace of 476,000 homes, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department said today in Washington. The median selling price climbed 10.3% from May 2012.
New and previously owned homes are in demand, driving residential construction and aiding the economic expansion. Consumers who long held off on purchases are entering the market even as borrowing costs increase, encouraged by rising property values and gains in employment.
“The housing recovery is alive and well and has a long way to go, and higher rates aren’t going to choke it off,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who projected a gain to 475,000, matching the highest in the Bloomberg survey. “‘It’s given the economy, or will give the economy, a lot of oomph.”
The median estimate of 74 economists surveyed by Bloomberg called for a gain to 460,000. Projections ranged from 435,000 to 475,000. Monthly sales data all the way back to February were revised up, with April now at a 466,000 annualized rate compared with a previously reported 454,000 pace.
Other reports today showed manufacturing is stabilizing, price gains for existing houses are accelerating and consumer confidence is climbing.
Orders for U.S. durable goods, those meant to last at least three years, climbed a larger-than-projected 3.6% for a second month reflecting broad-based gains, according to figures from the Commerce Department. The median forecast of 81 economists surveyed by Bloomberg called for a 3% advance.
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. Property values increased 1.7 in April from the prior month following a 1.9% March advance, marking the biggest back- to-back gains since records began in 2000.
The Conference Board’s index of U.S. consumer confidence increased to 81.4 in June, the highest level since January 2008, from 74.3 a month earlier, data from the New York-based private research group showed.
Stocks climbed after the reports and as the People’s Bank of China said it will keep money-market rates at reasonable levels. The Standard & Poor’s 500 Index rose 0.5% to 1,580.42 at 10:16 a.m. in New York.
The median selling price of a new house increased to $263,900 in May from $239,200 a year earlier, according to today’s report from the Commerce Department.
Purchases rose in three of four U.S. regions, led by a 40.7% surge in the Midwest and a 20.7% gain in the Northeast. Sales in the Midwest reached an 83,000 annualized rate, the most since November 2007.
The supply of homes at the current sales rate was 4.1 months compared with 4 months in April. There were 161,000 new houses on the market at the end of May, up from 157,000 a month earlier.
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 May to the highest level in more than three years, rising 4.2% to an annual rate of 5.18 million, the National Association of Realtors reported last week. The median price of existing properties rose 15.4% from a year earlier to $208,000, the highest since July 2008, the data show.
An improving job outlook is also creating confidence. Employers in the U.S. added 175,000 jobs in May, more than the median forecast in a Bloomberg survey, and the jobless rate rose to 7.6% from 7.5% as the number of people entering the workforce swamped the number of jobs available.
Improvements in the employment situation and the housing market could boost business at companies like homebuilder and land developer AV Homes Inc., Chief Executive Officer Roger Cregg said, even as housing starts remain below long-run historical averages.
“Increased demand driven by recovery in the household formation, employment, and record affordability we’re seeing today,” are signs of the recovery, Cregg said in a June 19 call to discuss the announcement that private equity firm TPG Capital is taking a more than 40% stake in the Scottsdale, Arizona-based company.
Builders such as West Lake Village, California-based Ryland Group Inc., which reported a first-quarter profit for the first time in six years, still see further strides for housing.
“There is no market that is not active today, which is another good sign,” Chief Executive Officer Larry T. Nicholson said in a June 13 presentation.
Confidence among homebuilders rose in June to a seven-year high, the National Association of Home Builders/Wells Fargo index showed June 17. The index rose to 52 from 44 in May, the biggest monthly increase since September 2002, the Washington- based group said.
The average rate on a 30-year fixed mortgage was 3.93% in the week ended June 20, up from a low of 3.31% in November yet below levels seen in the years leading up to the last recession, according to figures from Freddie Mac. The rate averaged 6.42% in 2006 and 6.33% in 2007.
Record monetary stimulus from the Federal Reserve had helped keep borrowing costs low. The Federal Open Market Committee said last week that the bank will keep buying $85 billion bonds a month, for the time being, though Fed Chairman Ben S. Bernanke said the central bank will probably trim purchases later in 2013 and halt them around mid-2014 as long as the world’s largest economy performs in line with Fed projections.