New home sales in US rebound in April

Purchases of new houses rose in April to the highest level this year after plunging to a record low two months earlier.

Sales climbed 7.3 per cent to a 323,000 annual pace last month, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for sales at a 300,000 annual rate, unchanged from the prior month. Housing prices rose from a year earlier.

Job gains and increased affordability may be starting to help underpin a housing market that’s lagged behind the rest of the economy. Nonetheless, the prospect that foreclosures will keep driving down property values means that buyers may continue to favour previously owned dwellings, indicating it will take years for builders like D R Horton Inc to see a full recovery.

“Affordability is good and we are getting some job growth,” Robert Brusca, chief economist at Fact & Opinion Economics in New York, said before the report. “There might be light at the end of the tunnel.”

Stocks held earlier gains after the report. The Standard & Poor’s 500 Index rose 0.3 per cent to 1,320.94 at 10.07 am in New York. The S&P Supercomposite Homebuilding Index climbed 0.5 per cent.

Estimate in the Bloomberg survey of 75 economists ranged from 280,000 to 320,000. Sales in March were revised to a 301,000 annual rate from a 300,000 previously reported. New houses sold at 278,000 rate in February, matching the pace in August as the lowest in data going back to 1963.

The median sales price increased 4.6 per cent from the same month last year, to $217,900, today’s report showed.

The gain may reflect a change in the mix of sales to higher-priced homes in the West, where demand jumped 15 per cent. The other three regions also saw purchases increase.

The supply of homes at the current sales rate dropped to 6.5 month’s worth in April, the lowest in a year, from 7.2 months in March. There were 175,000 new houses on the market at the end of April, the fewest since records began in 1963.

Building executives are still concerned about the outlook. Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of Fort Worth, Texas-based D R Horton Inc, the second-largest US home builder by revenue. “We feel it could still be a struggle in 2012.”

Builders are cutting back as a result. Housing starts fell 11 per cent in April to a 523,000 annual pace, the second-weakest reading since April 2009’s record low, figures from the Commerce Department showed last week.

One reason for the slump is growing interest from investors in buying distressed properties. Previously owned homes sold at a 5.05 million annual rate in April, down 0.8 per cent from the prior month, data from the National Association of Realtors showed May 19. All-cash deals accounted for 31 per cent of transactions, and distressed properties, including foreclosures and short sales, made up 37 per cent, the group said.

As distressed transactions have played a bigger role, new- home sales have shrunk as a share of total sales. They accounted for just under 6 per cent of the market in March, down from 16 per cent at their peak in July 2005.