Tags: New | Home | Sales | Prices

New Home Sales Dip but Prices Jump to 5-Year High

Wednesday, 26 Sep 2012 10:12 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
New home sales held near two-year highs in August and prices vaulted to their highest level in more than five years, adding to signs of a broadening housing market recovery.

The Commerce Department said on Wednesday sales slipped 0.3 percent to a seasonally adjusted 373,000-unit annual rate, but the decrease was from an upwardly revised 374,000-unit July pace that was the fastest since April 2010.

From a year ago, sales were up 27.7 percent last month.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

At the same time, the median price of a new home increased a record 11.2 percent in August to $256,900 — the highest level since March 2007. Compared to August last year, the median sales price jumped 17 percent, the largest rise since December 2004.

The report was in keeping with other data that have suggested a turn-around in the housing market, which collapsed in 2006, igniting the 2007-09 recession.

Home resales surged last month, homebuilder sentiment jumped to a six-year high in September and home prices in 20 major metropolitan areas rose in July for a sixth straight month, recent reports have shown.

Still, the housing market lacks sufficient strength to take the baton from the faltering manufacturing sector as the main driver of the U.S. economic recovery.

"There are increased signs that the housing recovery is now on a more sustainable path, though its impact on overall economic activity will remain relatively modest at best over the near-term," said Millan Mulraine, a senior economist at TD Securities in New York.

U.S. financial markets were little moved by the data amid worries Spain's reluctance to ask for a full-blown bailout would prolong Europe's debt crisis. However, an index of housing-related stocks fell as the pace of home sales was not as strong as expected.

MISSING PISTON

The Federal Reserve targeted housing this month as a channel to spur faster economic growth.

Fed Chairman Ben Bernanke said housing was the "missing piston" in the recovery and the central bank announced it would buy $40 billion in mortgage-backed securities per month until the outlook for employment improved significantly.

Those measures have pushed mortgage rates to record lows, and led to a rebound in demand for loans to purchase homes last week, a second report showed. Fixed 30-year mortgage rates hit an all-time average low of 3.63 percent last week.

Home building is expected to add to gross domestic product growth this year for the first time since 2005.

Home builder Lennar Corp. on Monday reported a 44 percent jump in orders for new homes during the third quarter, the sixth straight quarter of growth.

While residential construction accounts for only about 2.5 percent of GDP, economists estimate that for every new house built, at least three new jobs are created.

In addition, economists said rising home values could support consumer spending.

"The turn in home prices is important, not only because the housing industry is an important employer, but also the wealth effect created by rising home prices can lift consumer spending on other big-ticket items," said Steven Ricchiuto, chief economist at Mizuho Securities in New York.

The housing recovery is being driven by dwindling supplies of homes on the market, especially distressed properties that tend to sell well below their cost of construction.

Home builders are also keeping inventories lean.

The inventory of new homes on the market held near record lows last month. At August's sales pace it would take 4.5 months to clear the houses on the market, unchanged from July.

"For years after the collapse in housing, home builders have kept very lean inventories of new homes so any marginal pickup in sales activity leads to a notable pickup in building," said Ellen Zentner, a senior economist at Nomura Securities International in New York.

New home sales were up in three of the four regions, surging 20 percent to a near two-year high in the Northeast. Sales in the South fell 4.9 percent.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.


© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Fortune's Newmyer: Defense Industry Wins in War Against ISIS

Monday, 15 Sep 2014 13:44 PM

It might not be clear when or if the United States will win the emerging war against ISIS, but the conflict is already p . . .

Calpers' Hedge-Fund Exit Stemmed From Challenge to Expand Assets

Tuesday, 16 Sep 2014 11:36 AM

The California Public Employees' Retirement System's decision to divest its entire $4 billion from hedge funds came afte . . .

Household Incomes Nearly Flat in 2013, While Poverty Dips Slightly

Tuesday, 16 Sep 2014 11:11 AM

The median U.S. household income remained nearly flat at $51,939 in 2013 compared with the previous year, according to f . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved