Home Sales Rise in May; Goods Orders Fall
Sales of existing homes rose briskly in May, and orders for costly manufactured goods weakened, reports said Wednesday, underlining the economy’s slow but steady growth in the second quarter.
The National Assn. of Realtors said sales of previously owned homes climbed 4.4% last month to an annual rate of 4.24 million, despite firmer prices and slightly higher mortgage rates.
The California real estate market also performed well in May, with price appreciation in most of Southern California helping boost the statewide median by 3.5%--the largest year-to-year increase in more than five years, according to the group. The median price for an existing, single-family home in May was $185,360.
The Commerce Department said orders for long-lasting durable goods such as cars and refrigerators fell 0.6% in May to a seasonally adjusted $176.1 billion after a revised 1.8% jump in April.
The data will be eyed by Federal Reserve Board policymakers who meet next week to weigh their next move on interest rates. Analysts said it was likely that the central bank would hold rates steady, counting on slower economic growth that will not fuel inflation.
“This only reinforces the argument that the Federal Reserve will keep monetary policy steady,” said John Lonski, chief economist at Moody’s Investors Service Inc. in New York. The central bank raised rates in March, the first increase in more than two years, in a bid to ward off inflation.
The drop in durable goods orders was broad-based, with most major product categories aside from electrical goods posting declines. It followed a revised increase in April orders that had been reported as a smaller 1.3% gain.
The national home sales report showed that a solid job market and steady income gains fueled consumer optimism and persuaded many to commit to mortgages.
“Given the robust activity earlier this year, we had expected sales to ease off, but the current volume reflects sustained consumer confidence, strong employment figures and some pent-up demand in the trade-up market,” said Russell Booth, president of NAR.
Existing-home sales in May were the strongest since the 4.2-million annual rate the year earlier.
The May increases in Southern California ranged from 10.3% in the Palm Springs-Lower Desert area, to 1.4% in Los Angeles.
“After lagging behind the northern section of the state for so long, it is very gratifying to see noteworthy price appreciation finally reach Southern California,” CAR President Bob Kulick said in a statement.
Investors saw the reports as sending conflicting signals, as the Dow Jones industrial average seesawed from a 54-point gain to a 129-point loss before closing at 7,689.98, down 68.08, and U.S. bond prices fell, pushing the yield on the benchmark 30-year Treasury up to 6.73%.
In its report, the Commerce Department said transportation orders fell 3.3% in May after a 2.8% April rise. It was the third decline in transportation orders in the last four months, and the department said it was because of dips for both motor vehicles and parts and for aircraft and parts.
Transportation goods account for about a fifth of total durable goods orders. Excluding transportation, durables orders rose a slim 0.2% in May after a 1.6% April gain.
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Existing-Home Sales
Seasonally adjusted annual rate, in millions of units:
May: 4.24
Source: National Assn. of Realtors
Durable Goods
New orders, in billions of dollars, seasonally adjusted:
May: $176.1
Source: Commerce Department
