story by Michelle Jamrisko
Purchases of new U.S. homes in August held close to a two-year high, further evidence of recovery in the housing market that will help sustain the economic expansion.
Sales fell 0.3% to a 373,000 annual pace following a revised 374,000 rate in July that was higher than previously estimated and the strongest since April 2010, figures from the Commerce Department showed today in Washington. The median estimate of 71 economists surveyed by Bloomberg forecast a rise to 380,000.
Record-low borrowing costs continue to attract buyers, lifting demand for homebuilders including Lennar Corp., while a drop in the supply of foreclosed homes is easing downward pressure on prices. Federal Reserve policy makers have targeted the housing market with further accommodation measures in order to spur growth and reduce unemployment.
“Builders are a little more optimistic about future sales and buyer traffic and the mortgage environment is favorable,” said Anika Khan, an economist in Charlotte, N.C., at Wells Fargo Securities LLC, a unit of the largest U.S. mortgage lender. “New-home sales will continue to improve over the next few months and in the coming year.”
New-home sales estimates of economists surveyed ranged from 360,000 to 400,000. July’s reading was previously reported as 372,000.
Improving demand is bolstering Miami-based Lennar and other homebuilders, allowing for longer-term construction strategies.
“Simply put, the housing market is recovering, not only are our sales margins and backlogs improving, but the beginnings of a sense of visibility are coming back to underwriting land acquisition and planning for the future,” Stuart Miller, CEO of Lennar, said on a Sept. 24 earnings call.
“The home building business is beginning to revert to normal and that’s positive for the U.S. economy in general, which is in turn good for a sustained recovery in the housing market,” Miller said.
New-home purchases in the U.S. fell in one of four regions as demand in the South dropped 4.9%. Sales jumped 20% in the Northeast, rose 1.8% in the Midwest and 0.9% in the West.
The drop in sales in the South, where median prices are generally lower, combined with the surge in the Northeast, where property values tend to be higher, pushed costs up nationally. The median price of all sales last month was $256,900, an increase of 17% from August 2011. The 12-month advance was the biggest since December 2004. The 11% gain from July was the largest month-over-month gain in records going back to 1963.
Sales of new houses were up 28% from a year ago, today’s report from the Commerce Department showed.
The supply of homes at the current sales rate held at 4.5 months. There were 141,000 new houses on the market at the end of August, matching July’s record low.
A lack of supply may also be playing a role in limiting sales. The number of completed houses on the market dropped to a record-low 38,000 last month, today’s report showed.
The average rate on a 30-year fixed mortgage dropped to 3.49% in the week ended Sept. 20, matching a reading two months ago as the lowest in records dating to 1972, according to McLean, Va.-based Freddie Mac.
Among other signs of progress, builders began work in August on the most one-family homes since April 2010, figures from the Commerce Department showed last week. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in September to the highest level since June 2006.
Home prices in 20 U.S. cities climbed more than forecast in July from a year earlier, a report from S&P/Case-Shiller showed yesterday.
The Fed has committed to purchasing $40 billion of mortgage debt a month to lower borrowing costs, helping the housing market that Fed Chairman Ben Bernanke called “one of the missing pistons in the engine.”