New home sales strengthen as builders drive growth
NEW HOME CONSTRUCTION in the U.S. rose in March thanks, in part, to near record-low mortgage rates.
BLOOMBERG NEWS PHOTO/PATRICK T. FALLON
By Alex Kowalski Bloomberg News
WASHINGTON - Sales of new U.S. homes advanced in March as near record-low mortgage rates helped the industry complete the strongest quarter since 2008, putting the economy on firmer footing.
Purchases of single-family properties climbed 1.5 percent last month to a 417,000 annual pace, Commerce Department figures showed today in Washington. The median estimate of 76 economists surveyed by Bloomberg called for March sales to rise to 416,000.
Shares of homebuilders such as Toll Brothers Inc. rallied as cheaper borrowing costs and rising household formation bolstered demand. The figures underscore the view of some Federal Reserve policy makers that residential real estate will contribute more to economic growth this year.
“There is momentum in the housing market, in that inventories are lean, prices are picking up, and people are trying to buy, which is fueling the recovery,” said Daniel Silver, an economist at JPMorgan Chase & Co. and the second-best forecaster of new-home sales in the past two years, according to data compiled by Bloomberg. “You’re seeing spillover in the housing market from broader economic improvement.”
Home sales averaged a 424,000 annual rate in the first three months of this year, the strongest since the third quarter of 2008.
Stocks climbed after the figures and as earnings from Travelers Cos. to Netflix Inc. beat estimates. The Standard & Poor’s 500 Index rose 1.2 percent to 1,574.20 at 12:24 p.m. in New York. The S&P 500 Supercomposite Homebuilding Index jumped as much as 6.3 percent, the biggest gain since July 26.
Barclays Plc analysts raised their view on the industry today to positive from neutral, projecting a 10 percent jump in new-home prices this year amid a “fast and furious” recovery. The median price of a new home climbed 3 percent last month from a year earlier to $247,000, today’s report showed.
Today’s housing figures showing strength in the U.S. economy contrasts with weakness elsewhere. Euro-area services and factory output shrank for a 15th month in April as the currency bloc struggled to emerge from a recession, adding to pressure on the European Central Bank to do more to boost growth.
China’s manufacturing is expanding at a slower pace this month on weakness in global and domestic demand, according to a Purchasing Managers’ Index released by HSBC Holdings and Markit Economics, fueling concern that the world’s second-biggest economy is faltering.
Economists’ estimates for U.S. March new-home sales ranged from rates of 395,000 to 435,000. February was previously reported at a 411,000 annual rate.
Purchases were 17.6 percent higher in March than the same period in 2012, today’s report showed.
Sales increased in two of four regions from the prior month, with a 20.6 percent gain in the Northeast and a 19.4 percent advance in the South. Demand decreased 20.9 percent in the West and 12.1 percent in the Midwest.
Builders are responding to increased demand by making more homes available. There were 153,000 new houses on the market at the end of March, the most since November 2011. At the current sales rate, the supply would last 4.4 months, the same as in February.
“We’re in recovery, it’s early, but it certainly feels like it’s real and it feels like it will be sustained,” Douglas Yearley, chief executive officer of Horsham, Pennsylvania-based Toll Brothers, the largest U.S. luxury-home builder, said during a March 4 conference presentation. “We had a few false starts over the last few years, but we had a really good spring 2012 selling season. And now we’re having an even better spring 2013 selling season.”