Purchases of new homes in the U.S. rose more than projected in April, a sign this part of the market is picking up steam during the busiest selling period of the year.
Sales increased 6.8% to a 517,000 annualized pace
Steady hiring, low borrowing costs and a limited supply of existing homes is 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.
"Housing is coming back after a bad winter period," said Robert Brusca, president of Fact & Opinion Economics in New York, whose forecast for sales was among the closest of economists surveyed by Bloomberg. "There's going to be an improving housing market, but a slowly improving one."
Other reports Tuesday showed U.S. business investment could pick up in the second half of the year, prices of existing homes also climbed and consumer confidence improved.
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The Conference Board's consumer-confidence index increased to 95.4 in May from a revised reading of 94.3 the month before, the New York-based private research group said.
Economists' estimates for new-home sales ranged from 480,000 to 540,000. The reading for the prior month was previously 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 timelier 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 on 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.
Federal Reserve Chair Janet Yellen, speaking on May 22 in Providence, R.I., noted home prices are recovering and said population growth is creating a need for more housing. Nevertheless, credit remains tight for some would-be homeowners and "activity in the housing sector is likely to improve only gradually," she said.
The improving job market remains a support for housing demand. The unemployment rate fell in April to 5.4%, the lowest since May 2008, according to the Labor Department. Payrolls climbed by 223,000 after an 85,000 in March. Hourly pay was up 2.2% over the past 12 months, holding in the narrow range tracked over the past four years.
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.
