Purchases of new houses in the U.S. rose more than forecast in December as the industry struggled to stabilize following its worst year on record.
Sales, tabulated when contracts are signed, climbed 18 percent to a 329,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a rise to 300,000. The percentage jump was the biggest since 1992, and was led by a record 72 percent surge in the West.
The gain follows data on existing home purchases for December that showed buyers are returning to the market after a mid-2010 slump to take advantage of low mortgage rates and reduced prices. Even so, mounting foreclosures and unemployment above 9 percent help explain why Federal Reserve policy makers today are expected to press on with a $600 billion stimulus.
“Housing is stabilizing,” Jim O’Sullivan, chief economist at MF Global Ltd. in New York, said before the report. “As the labor market picks up, so will demand for homes. Housing is weak, but not a significant negative for the economy.”
Stocks rose after the report. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,293.56 at 10:03 a.m. in New York. The S&P Supercomposite Homebuilder Index jumped 1.5 percent.
Estimates of the 79 economists surveyed ranged from 270,000 to 315,000, after a previously reported rate of 290,000 for November. Last month’s sales pace was the highest since April.
For all of 2010, sales fell 14 percent from the prior year to 321,000, the lowest level in data going back to 1963.
Purchases climbed in three of four U.S. regions last month. The Northeast showed a 5 percent decrease last month.
The median sales price increased 8.5 percent in December from the same month in 2009, to $241,500, today’s report showed. The increase in values probably reflects the change in the mix of sales toward the West where prices are generally higher.
The supply of homes at the current sales rate fell to 6.9 month’s worth, the lowest since April, from 8.4 months in November. There were 190,000 new houses on the market at the end of December, the fewest since January 1968.
Previously-owned home purchases jumped more than forecast in December as buyers tried to lock in low mortgage rates before the economic recovery pushed borrowing costs up even more, figures from the National Association of Realtors showed last week. Existing house purchases are calculated when a contract closes.
New-home sales are considered a more timely barometer than purchases of previously owned homes, which account for about 90 percent of the housing market.
Housing demand gyrated last year, reflecting a boost from a home buyer tax incentive of as much as $8,000 that gave way to a plunge in sales by mid-2010 after the credit ended.
With sales yet to show sustained strength, builders have cut back on the new-home supply. Housing starts fell in December to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed last week.
An unemployment rate that is slated to average more than 9 percent again this year signals some homeowners will keep having trouble meeting mortgage payments, leading to an increase in distressed properties. The number of homes getting a foreclosure filing will rise about 20 percent this year, reaching a peak for the housing crisis, said RealtyTrac Inc., an Irvine, California-based data seller.
Prices remain under pressure, hurting homeowner equity while at the same time improving affordability. The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from the prior year, the biggest 12-month decrease since December 2009, a report from the group showed yesterday.
Horsham, Pennsylvania-based Toll Brothers Inc., the largest U.S. luxury-home builder, is among companies concerned about foreclosures in markets like Las Vegas and Phoenix, even as it is “optimistic” about the upcoming spring selling season, according to Martin Connor, chief financial officer.
“I don’t think it’s quite turned the corner yet,” Connor said in a Bloomberg Television interview on Jan. 5, referring to the housing industry. Still, general positive economic news including an increase in retail sales “bodes well for the housing market,” he said.
While signs such as improving consumer confidence indicate the world’s largest economy is gaining speed, Fed Chairman Ben S. Bernanke and his fellow policy makers will likely complete the second round of quantitative easing to keep borrowing costs low and spur growth. Their statement is due at around 2:15 p.m. Washington time.
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