New homes sell in May at liveliest pace since 2008

A sign marks a home for sale in West Des Moines, Iowa, in May. Sales of new homes last month exceeded economists’ forecasts as the industry rebounded from a winter lull.
A sign marks a home for sale in West Des Moines, Iowa, in May. Sales of new homes last month exceeded economists’ forecasts as the industry rebounded from a winter lull.

Purchases of new homes in the U.S. rose in May, indicating that the industry is rebounding from a winter-induced lull at the start of the year.

Sales increased 18.6 percent, the biggest one-month gain since January 1992, to a 504,000 annualized pace, the Commerce Department said. The reading exceeded all forecasts in a Bloomberg survey of 74 economists and was the strongest since May 2008.

The report mirrors data Monday that showed a pickup in previously owned home sales. Builders such as Hovnanian Enterprises Inc. are optimistic the recovery is on track after harsh weather early this year hurt demand.

"Housing is beginning to revive," said Stephanie Karol, an economist at IHS Global Insight. "It's a step in the right direction. The job market is helping, and there was an expansion of supply the past couple of months."

The median forecast in the Bloomberg survey projected a gain in new-home sales to a 439,000 annualized rate. Estimates ranged from 415,000 to 462,000. The reading for April was revised to 425,000 from a previously reported 433,000.

The median sales price increased 6.9 percent from May 2013 to reach $282,000, Tuesday's report showed. The number of houses for sale at the end of the month held at 189,000.

Purchases climbed in all four regions, led by a 54.5 percent jump in the Northeast.

The supply of homes at the current sales rate dropped to 4.5 months, the lowest since June 2013, from 5.3 months in April.

New-home sales are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings, but represent only 7 percent of the home sales market.

Previously owned home sales are regaining their footing after a stumble early in the year, figures from the National Association of Realtors showed Monday. Purchases climbed 4.9 percent, the biggest increase since August 2011, to a 4.89 million annualized rate. The level was the strongest since October. The median home price rose 5.1 percent from May 2013, matching the April gain as the smallest 12-month advance since the year ended March 2012.

Another report Tuesday showed home prices in 20 U.S. cities rose at a slower pace than forecast in the year ended in April as declining affordability put a lid on appreciation. The S&P/Case-Shiller index of property values increased 10.8 percent from April 2013, the smallest 12-month gain in more than a year, after rising 12.4 percent in March. The median projection of 25 economists in a Bloomberg survey called for an 11.5 percent year-over-year increase in April.

Annual price gains slowed in 19 of the 20 cities. Only Boston saw price increases accelerate.

Sellers' ability to ask ever-higher prices has diminished as smaller wage gains make it difficult for some prospective buyers to qualify for financing. Cheaper properties, an easing of credit standards and employment opportunities accompanied by faster income growth would help brighten the outlook for residential real estate.

"It's a movement toward a more normal market," Scott Anderson, chief economist at Bank of the West in San Francisco, said before the report. "We're seeing a normalization of the market going forward."

The S&P/Case-Shiller index is based on a three-month average, which means the April figure was influenced by repeat sales transactions in February and March.

Home prices adjusted for seasonal variations increased 0.2 percent in April from March, the smallest gain since February 2012 and less than the 0.8 percent median forecast in the Bloomberg survey. Unadjusted prices rose 1.1 percent.

Information for this article was contributed by Shobhana Chandra, Ainhoa Goyeneche and Lorraine Woellert of Bloomberg News and Christopher S. Rugaber of The Associated Press.

Business on 06/25/2014

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