Purchases of previously owned homes climbed a more than forecast 6.5% to a 5.39 million annualized rate last month, figures from the National Association of Realtors showed Aug. 21. The median price increased 13.7% in July from a year earlier, the most since October 2005.
The slump in new-home sales last month is at odds with growing builder confidence that’s at the highest level since November 2005.
Rising home prices and gains in stock portfolios and employment have increased the appeal of purchasing a home, with Toll Brothers Inc., the largest U.S. luxury-home builder, reporting sales that grew 24% in the three months through July from the year before. Orders rose 26% to 1,405 homes.
“Inventory levels are still tight in almost all of our markets and housing remains very affordable,” co-founder Robert Toll said on an Aug. 21 conference call. “Unemployment trends are slowly improving and demand based on household formations is compelling, especially given the still very-low volume of industry home production.”
A shortage of lots, materials and labor may push some builders to limit supply of new homes as they try to boost prices and sales. Builders started work on 2.2% fewer single-family homes last month, taking them to a 591,000 annualized rate, the least since November, Commerce Department data showed last week.
While mortgage rates rising from record lows will initially push some buyers into the market, it may have a damping effect on future home sales, TD Securities’ Mulraine said. The average rate on a 30-year, fixed-rate purchase loan was 4.58% in the week ended Aug. 22, the highest in two years, according to McLean, Virginia-based Freddie Mac. The 30-year rate reached a record-low 3.31% in November.
Even as rising rates may hinder housing affordability, “we’ve got a long way to go before it should have a dramatic impact, we believe, on mortgage availability or the attractiveness to a consumer, or a homeowner to take out a mortgage,” Carol Tome, chief financial officer of Home Depot Inc., said on an Aug. 20 conference call.
Comparable-store sales at Atlanta-based Home Depot, the largest U.S. home-improvement retailer, jumped the most in 14 years as shoppers buoyed by the housing recovery increased spending. The average purchase at Home Depot climbed 4.3% to $57.39 in the second quarter.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.