Sales of new houses rose in November to the highest level in more than two years, the latest sign that the real-estate market is helping lift the U.S. economy.
Purchases climbed 4.4 percent to a 377,000 annual pace, the most since April 2010, following a revised 361,000 rate in October, the Commerce Department reported today in Washington. The median estimate of 71 economists surveyed by Bloomberg called for sales to increase to 380,000.
Low mortgage rates and dwindling foreclosures are stabilizing prices and attracting buyers more than three years after a recession that was fueled by the industry’s collapse. Growing demand coupled with less inventory has given a boost to Toll Brothers Inc. (TOL:US) and other companies, which are competing for buildable lots.
“The housing market’s in a steady recovery that’s likely to continue,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “We’re probably in the early stages of this positive feedback loop” of cheap credit, tight inventory and rising prices, he said. “It’s not likely to get to the heydays of the last boom but the housing market is doing well.”
Economists’ estimates ranged from a sales rate of 360,000 to 398,000.
Other reports today showed jobless claims dropped last week and readings of consumer confidence showed Americans remained upbeat about the current state of the economy while growing more concerned about next year.
Applications for jobless benefits decreased 12,000 to 350,000 in the week ended Dec. 22, according to Labor Department figures. Claims in 19 states and territories were estimated because government office closures on Dec. 24 prevented a complete count, a Labor Department spokesman said as the figures were released.
The Bloomberg Consumer Comfort Index was little changed at minus 32.1 in the period ended Dec. 23 from minus 31.9 in the prior week, a drop that was within the margin of error of 3 percentage points. The gauge, which is based on current conditions, was less than a point from an April reading that was the highest since March 2008.
The New York-based Conference Board’s measure of consumer confidence dropped more than forecast in December, another report showed. The gauge fell to a four-month low of 65.1 this month from 71.5 in November as Americans turned more pessimistic about the outlook for growth.
Stocks fell as lawmakers returned to Washington to resume budget talks. The Standard & Poor’s 500 Index dropped 0.7 percent to 1,410.52 at 10:27 a.m. in New York.
Demand for new houses was up 15.3 percent from a year ago, today’s report showed, today’s Commerce Department report showed. The median price for a new house rose 14.9 percent in November from the same month a year ago to $246,200. Builders are reporting increased construction costs and higher prices for undeveloped land.
“Part of the home price increases have been offset by construction cost increases,” said Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc. (HOV:US), based in Red Bank, New Jersey.
“However, the gradual and steady nature of this recovery is helping to keep construction costs from going out of control,” Hovnanian said on a Dec. 13 earnings call. “Our current costs are still significantly below our costs during the cyclical peak.”
Home sales increased in two of four regions last month, led by a 21.1 percent jump in the South. Demand in the Northeast increased 12.5 percent. Purchases fell 17.8 percent in the West and 12.5 percent in the Midwest.
The supply of homes at the current sales rate dropped to 4.7 months from 4.9 months in October. There were 149,000 new houses on the market at the end of the month compared with 147,000 in October.
Sales of new homes, which are calculated when purchase contracts are signed, are considered a timelier barometer than purchases of existing dwellings, which are calculated when a contract closes. New construction 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.
Sales of existing homes rose more than forecast in November to a three-year high, the National Association of Realtors reported last week. Previously owned homes advanced 5.9 percent to a 5.04 million rate.
With fewer distressed properties on the market, prices have started to stabilize. Home prices climbed more than forecast in October, a report yesterday showed. The S&P/Case-Shiller index of property values in 20 cities increased 4.3 percent from October 2011, the biggest 12-month advance since May 2010.
Builder confidence has been improving as well. The National Association of Home Builders/Wells Fargo builder sentiment index increased in November to the highest level since April 2006.
Cheaper borrowing costs are helping drive housing demand. A 30-year, fixed-rate mortgage averaged 3.35 percent in the week ended today, according to Freddie Mac. (FMCC:US) That is little changed from the 3.31 percent reached in late November that was the lowest in data going back to 1972
Policy makers are striving to keep rates low to spur an even bigger recovery in housing. The Federal Reserve, which has kept its benchmark interest rate near zero since 2008, this month said it would hold it low “at least as long” as unemployment remains above 6.5 percent and inflation projections are for no more than 2.5 percent.
Builders are seeing more serious buyers walk into showrooms, Toll Brothers Chief Executive Officer Douglas Yearley said. Purchase contracts are up 34 percent from a year ago, he said.
“Pent-up demand, rising home prices, low interest rates, and improving customer confidence motivated buyers to return to the housing market in fiscal year 2012,” Yearley said on a Dec. 4 earnings call. “As household formations accelerated and unsold home inventories dropped to record lows, the industry took further steps towards a sustained housing recovery.”
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