BLBG: Sales of New U.S. Homes Climbed in September to Two-Year High
Purchases of new U.S. homes rose in September to the highest level in more then two years as the industry that helped bring on the recession forged its way toward recovery.
Sales climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August, figures from the Commerce Department showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg called for sales to rise to 385,000.
Demand for new homes is being driven by record-low mortgage rates and population growth, which will help generate business for builders like Hovnanian Enterprises Inc. (HOV) A lack of jobs and strict lending conditions still pose hurdles to a more pronounced rebound, one reason why Federal Reserve policy makers have pledged to keep pumping money into the economy.
“The recovery is underway,” Michelle Meyer, senior U.S. economist at Bank of America Corp. in New York, said before the report. “Mortgage rates have continued to fall partly in response to the Fed’s programs, so that helps to stimulate new demand. The fact that builders are starting to add new inventory, that should go hand in hand with an increase in sales.”
The economists’ estimates ranged from a sales rate of 370,000 to 410,000. The August reading was previously reported as a 373,000 annual rate.
A government tax credit helped boost sales in April 2010, the last time they were this strong.
Demand for new houses was up 27.1 percent from a year ago, today’s report showed. The median price for a new house climbed 11.7 percent in September from the same month last year to $242,400.
Regional Breakdown
Purchases increased in three of four regions last month, led by a 16.8 percent gain in the South, and a 16.7 percent increase in the Northeast. Sales in the Midwest dropped 37.3 percent, the biggest decrease since January 1994.
A jump in housing starts in September was the latest sign the new-home industry is showing signs of vitality. Beginning construction rose last month to an 872,000 annual rate, the fastest pace since July 2008 and exceeding all forecasts in a Bloomberg survey, Commerce Department figures showed Oct. 17.
Supporting future construction, the supply of homes at the current sales rate dropped to 4.5 months, the lowest since October 2005, from 4.7 months in August. There were 145,000 new houses on the market at the end of September.
The building environment has made construction companies less pessimistic. The National Association of Home Builders/Wells Fargo builder sentiment index increased to 41 this month, the highest since June 2006 and the sixth-straight gain, figures showed yesterday. Still, readings below 50 mean more respondents said conditions were poor.
Housing ‘Rebounding’
“It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian, the best-performing homebuilding stock this year, told Bloomberg News after the report was released. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.”
The existing homes market is also improving. Figures from the National Association of Realtors last week showed previously owned homes sold at a 4.75 million rate in September and a 4.83 million rate in August, the strongest back-to-back pace since mid-2010.
Sales of new homes are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for 6.7 percent of the residential market in 2011, down from a high of 15 percent during the boom of the past decade.
Mortgage Rates
Cheap borrowing costs are underpinning a recovery. The average 30-year fixed rate mortgage was 3.37 percent in the week ended Oct. 18, near a record-low of 3.36 reported Oct. 4, according to data from Freddie Mac that dates back to 1971.
Another boon for housing, the number of households in the U.S. grew 2 percent in 2011, the biggest gain in 10 years, to 119.9 million, according to the most recent Census Bureau data.
Fed policy makers are trying to sustain the progress in the real-estate market. In September, Fed Chairman Ben S. Bernanke called housing “one of the missing pistons in the engine” as he announced the third round of large-scale asset purchases intended to push down long-term interest rates and spur growth.
The Federal Open Market Committee will release a statement on monetary policy at around 2:15 p.m. today following the conclusion of their two-day meeting in Washington.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
