Purchases of new homes in the U.S. jumped in January to the highest level since July 2008, showing the industry will keep adding to growth in the economy.
Sales, tabulated when contracts are signed, surged 15.6 percent to a 437,000 annual pace, exceeding the highest forecast in a Bloomberg survey and following a 378,000 rate in the prior month, figures from the Commerce Department showed today in Washington. The median estimate of 72 economists surveyed by Bloomberg called for a rise to 380,000. Prices climbed.
Demand picked up in all four regions as buyers took advantage of mortgage rates near a record lows, helping to boost the outlook for companies from PulteGroup Inc. to Mohawk Industries Inc. A stronger job market and less competition from foreclosures would ensure a more pronounced rebound in the market that’s become a source of strength for the expansion.
“We expect the improvement in the new-home market will continue this year,” Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, said before the report. Meyer was the best forecaster for new-home sales over the past two years, according to data compiled by Bloomberg.
Conditions are “very supportive for new-home sales and construction,” she said. “Inventory is historically low, foreclosures are slowing, affordability is very high and household formation is improving.”
Economists’ estimates ranged from 355,000 to 409,000 after a previously reported 369,000 pace in December. Sales of new homes rose to 367,000 last year, the strongest since 2009 and up from 306,000 in 2011.
Another report today showed home prices in 20 U.S. cities rose in the 12 months to December by the most since July 2006. The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011 after advancing 5.4 percent in November, the New York-based group said. Nineteen of 20 cities showed gains.
The supply of homes at the current sales rate dropped to 4.1 months, the lowest since March 2005, from 4.8 months in December. There were 150,000 new houses on the market at the end of January, the same as the prior month.
The median sales price increased 2.1 percent in January from the same month last year, to $226,400, today’s report showed.
Purchases jumped 45.3 percent in the West to a 125,000 annual rate, the most since April 2008. Sales climbed 3.2 percent in the South to a 225,000 annual pace, the strongest since April 2010. Purchases increased 27.6 percent in the Northeast and 11.1 percent in the Midwest.
Sales of new properties are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for about 7 percent of the residential market in 2012.
Existing-home sales increased 0.4 percent to a 4.92 million annual rate in January, the National Association of Realtors reported last week. The number of available properties slumped to 1.74 million, the lowest level since 1999.
The Realtors group’s figures also showed distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 23 percent of existing-home purchases, were down from 35 percent in January 2012.
Conditions including low mortgage rates, continued increases in rental rates, rising home prices, and limited housing stock are lifting the outlook for companies including Bloomfield Hills, Michigan-based PulteGroup, the largest U.S. homebuilder by revenue.
“2013 will be a better year for U.S. housing than 2012,” Richard Dugas, chief executive officer of PulteGroup, said on a Jan. 31 earnings call.
Housing-related businesses like Mohawk Industries, the world’s largest maker of flooring products, also are counting on the rebound.
“In the U.S. low mortgage rates, stabilizing home prices, improving employment should sustain the housing recovery,” Jeffrey Lorberbaum, chief executive officer of Calhoun, Georgia- based Mohawk, said on a Feb. 22 earnings call. “We anticipate revenue and earnings growth for 2013 as the U.S. market improves.”
Foreclosure filings fell 28 percent in January from a year earlier to the lowest level since April 2007, as a new California law slowed first-time defaults in the most-populous state, according to RealtyTrac, an Irvine, California-based data provider.
Borrowing costs continue to aid home buyers. The average rate on a 30-year fixed mortgage was 3.56 percent in the week ended Feb 21, down from 3.95 percent a year earlier, according to McLean, Virginia-based Freddie Mac. The rate reached an all- time low of 3.31 percent in November.
Among other signs of improvement, residential construction permits, a proxy for future work, jumped in January to a 925,000 annual rate, the highest since June 2008. Builders broke ground on 613,000 single-family houses at an annualized rate last month, also the most in over four years.
Ainhoa Goyeneche in Washington contributed to this report.