New-Home Sales Rise to Record Levels in West
Sales of new homes rose to a record level in May, propelled by strong demand in the West, government figures showed Monday, and with mortgage rates under 7%, analysts expect strong sales throughout the summer.
“I foresee a very solid third quarter,” said economist Paul Taylor of America’s Community Bankers, a trade organization for savings institutions.
Sales last month edged up 0.3% to a seasonally adjusted annual rate of 890,000, the highest since the government began tracking them in 1963, the Commerce Department said.
May marks the ninth consecutive month of sales at or above 800,000, the longest such streak in 21 years. For the first five months of the year, sales were 8.8% higher than the same period of last year.
“It’s not unexpected, given that mortgage rates have been coming down, we haven’t had a correction in the stock market and consumer confidence remains relatively high,” Taylor said.
Low mortgage rates make home payments more affordable, while a strong job market gives buyers the economic confidence they need to commit to a mortgage. And the huge accumulated gain in the stock market during the last several years gives some buyers the wherewithal for a down payment on a bigger house or vacation home.
Sales in the West jumped 15.7% in May to a seasonally adjusted annual rate of 265,000, the most since September 1979. They rose 3.3% in the Northeast but fell 6.7% in the South and were down 4.1% in the Midwest.
“There’s been a tremendous turnaround in California,” said economist David Seiders of the National Assn. of Home Builders. “However, the Midwest is stacking up as the weakest region, relatively speaking. They’ve done so well during the past couple of years. They’ve had their run.”
Nationally, the strong sales helped hold down the inventory of unsold homes. They totaled 289,000, a 3.9-month supply at the current sales pace, the same as the month before.
The median price of a new home was $149,900 in May, up 6.3% from a year ago.
Separately Monday, Dun & Bradstreet said business executives had slightly lower expectations during the second quarter, reflecting fears that the Asian economic crisis might hit home, but it said overall optimism remains high.
In its latest survey of 2,725 executives, Dun & Bradstreet said the respondents listed profits as the only area in which they foresaw an increase.
Seventy percent of the executives expected sales to increase, nearly level with 71% in the first quarter. But 66% expected higher profits, up from 63%.
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Seasonally adjusted annual rate, in thousands of units:
Source: Commerce Department