New Home Purchases Exceed Expectations in April
Sales increased 6.8% to a 517,000 annualized pace from a 484,000 rate in the prior month, figures from the Commerce Department showed May 26. The median forecast of 70 economists surveyed by Bloomberg called for 508,000. Prices picked up, and inventory was little changed.
Steady hiring, low borrowing costs and a limited supply of existing homes are helping lift demand for new properties. Housing-related companies from PulteGroup Inc. to Home Depot Inc. have said the spring selling season is off to a good start, and the brighter outlook for sales may spur more residential construction, which would contribute to economic growth.
“The fundamental drivers of housing demand are very much in place,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester Pennsylvania, said before the report. “The job market and historically low mortgage rates should entice more fence-sitters to re-engage.”
The S&P/Case-Shiller index of property values in 20 cities increased 5% in March from the same month last year, the group said. Nationally, prices rose 4.1% from March 2014.
Economists’ estimates for new-home sales ranged from 480,000 to 540,000. The reading for the prior month previously was reported as 481,000.
The median sales price increased 8.3% from April 2014 to $297,300, the report showed.
Purchases rose in two of four U.S. regions, led by a 36.8% surge in the Midwest, the biggest jump since October 2012, pointing to a rebound from harsh winter temperatures the month before.
The supply of homes at the current sales rate fell to 4.8 months from 5.1 months in March. There were 205,000 new houses on the market at the end of April compared with 204,000 the prior month.
New-home sales account for about 8% of the residential market and are tabulated when contracts are signed. They are considered a more timely barometer than purchases of previously owned dwellings. The latter are calculated when a contract closes, typically a month or two later.
Contract closings dropped 3.3% to a 5.04 million annualized rate in April after a 5.21 million pace that was the strongest in almost two years, the National Association of Realtors reported May 21. The median price of an existing home climbed 8.9% from a year earlier, the biggest 12-month gain since January 2014, while the number of properties on the market fell from the same time last year.
Buyers are getting help from low borrowing costs during the housing market’s busiest time of the year. The average 30-year, fixed-rate mortgage fell to 3.84% in the week ended May 21, close to the level at the start of 2015 and well below last year’s high of 4.53% in early January 2014, according to data from Freddie Mac in McLean, Virginia.
Recent growth in demand is feeding into homebuilding. Housing starts soared in April to a 1.14 million annualized rate, the most since November 2007, Commerce Department figures showed last week. More permits, a proxy for future construction, were issued than at any time since June 2008.
Companies that are optimistic include D.R. Horton Inc., the largest U.S. homebuilder by revenue, and PulteGroup, the third-largest U.S. homebuilder.
