Aug. 26 (Bloomberg) -- Purchases of new homes in the U.S. jumped more than
forecast in July, adding to signs that the economy is rebounding from the worst
recession since the 1930s.
Sales increased 9.6 percent, the most since February 2005, to a 433,000 annual
pace, figures from the Commerce Department showed today in Washington. The
number of houses on the market dropped to the lowest level in 16 years.
The gain in sales, together with rising purchases of existing homes and
steadying prices, indicate the housing slump may be ending as Federal Reserve
efforts to thaw credit and the Obama administration’s first-time homebuyer
incentives lift demand. Job losses and mounting foreclosures mean any rebound
in construction may be limited.
“We’re seeing a clear pickup in housing activity,” said Michael Moran, chief
economist at Daiwa Securities America Inc. in New York. “The correction phase
is essentially over and we expect continued improvement, though not a vigorous
pickup.”
Homebuilders’ stocks surged after the report, with the Standard & Poor’s
Supercomposite Homebuilding Index gaining 3.7 percent as of 10:23 a.m. in New
York. The broader S&P 500 Stock Index was up 0.4 percent at 1,031.95. Benchmark
10-year Treasury yields were little changed, at 3.45 percent.
Economists’ Forecasts
Economists forecast new home sales would rise to a 390,000 rate, according to
the median of 71 projections in a Bloomberg News survey. Estimates ranged from
365,000 to 420,000.
Last month’s pace was the highest in 10 months. The Commerce Department
revised June’s reading up to a 395,000 rate from a previously reported 384,000.
The median price of a new home decreased 12 percent to $210,100 from $237,300
in July 2008. Sales of new homes were down 13 percent from a year earlier.
The jump in sales was led by a 32 percent surge in the Northeast. Purchases
increased 16 percent in the South and 1 percent in the West. They dropped 7.6
percent in the Midwest.
Builders had 271,000 houses on the market last month, down 35 percent from
July 2008 and the fewest since March 1993. It would take 7.5 months to sell all
homes at the current sales pace, the shortest time since April 2007.
Home sales are responding to policy efforts such as an $8,000 tax credit for
first-time buyers, the Fed keeping its benchmark interest rate near zero and
central bank purchases of mortgage-backed securities to free up funding for
housing loans.
Bernanke Renomination
Chairman Ben S. Bernanke, who led the biggest expansion of the Fed’s power in
its 95-year history in order to stem the economic slide, was nominated to a
second term as chairman yesterday by President Barack Obama. In a speech last
week, Bernanke had said that “economic activity appears to be leveling out.”
“The prospects for a return to growth in the near term appear good,” Bernanke
said on Aug. 21 in Jackson Hole, Wyoming. The recovery will be “relatively slow
at first.”
Risks to a sustained rebound include a jobless rate that’s forecast to reach
10 percent by early 2010 and a surge in mortgage foreclosures. By driving down
prices, distressed properties compete with new houses, hurting construction.
Even so, the industry’s crisis is abating. The S&P/Case- Shiller national
home-price index, released yesterday, rose 2.9 percent in the second quarter
from the prior three months, the first increase since 2006 and the biggest in
almost four years.
Existing Homes
Existing home sales advanced in July to the highest level in almost two years,
boosted by lower prices, buyer incentives and near-record-low borrowing costs,
data from the National Association of Realtors showed last week.
While accounting for only about 7 percent of the housing market, new-home
purchases are considered a timelier indicator because they are based on
contract signings. Sales of previously owned homes, which make up the
remainder, are compiled from closings and reflect contracts signed weeks or
months earlier.
“We’re likely not to experience a lot of downside from here,” Pulte Homes Inc.
Chief Executive Officer Richard Dugas said last week. It could remain a “tough
environment for a while,” he added.
Pulte this month completed its purchase of Centex Corp., the first large
combination of publicly traded homebuilders since the housing recession began.
To contact the reporter on this story: Shobhana Chandra in Washington
[email protected]
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