Purchases of new U.S. homes rebounded in October from the lowest level in more than a year, signaling buyers are starting to take higher mortgage rates in stride.
Sales jumped 25.4% to a 444,000 annualized pace, following a 354,000 rate in the prior month that was the weakest since April 2012, figures from the Commerce Department showed today in Washington. The median forecast of 62 economists surveyed by Bloomberg called for 429,000.
Home sales are regaining strength as gains in employment and stock prices help consumers adjust to this year’s increase in borrowing costs and property values, which have hurt affordability. Builders such Hovnanian Enterprises Inc. are optimistic about the outlook for the market, which will need to expand to meet the needs of a growing population.
“The worst of the impact of higher mortgage rates seems to be behind us,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who forecast an increase in sales to 445,000. “If we continue to see improvements in employment and if mortgage rates stay where they are, we should see these levels sustained.”
Economists’ estimates in the Bloomberg survey ranged from 375,000 to 450,000. The 25.4% increase from September was the biggest one-month surge since May 1980.
Other reports today showed hiring picked up in November, the trade deficit narrowed in October and service industries grew last month at a slower pace than projected.
Companies boosted payrolls by a more-than-projected 215,000 last month, according to figures from the ADP Research Institute in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for a 170,000 advance. Estimates ranged from gains of 125,000 to 210,000.
The trade gap decreased 5.4% to $40.6 billion from a $43 billion shortfall in September that was larger than previously estimated, the Commerce Department also reported. The median forecast in a Bloomberg survey of 63 economists called for a $40 billion deficit. Exports climbed to a record.
The Institute for Supply Management’s non-manufacturing index decreased to 53.9 in November from 55.4 in the prior month, a report from the Tempe, Arizona-based group showed.
Stocks rose as investors speculated the data would influence the timing of the Federal Reserve’s decision to trim stimulus. The Standard & Poor’s 500 Index climbed 0.2% to 1,798.34 at 11:03 a.m. in New York.