Sales of new single-family homes jump 6.4% in April
The housing market may be in for a spring bounce.
Sales of newly built single-family homes surged 6.4% in April from a month earlier, jumping to a seasonally adjusted annual rate of 433,000, the Commerce Department said Friday. Economists were expecting monthly sales to reach an annual pace of about 420,000.
The report provided another sign that the housing market could be emerging from months of weakness.
“Buyers are gradually moving off the fence,” said Brad Hunter, chief economist at researcher Metrostudy.
It’s not just buyers of new homes. Sales of previously owned homes — the largest piece of the market — rose 1.3% in April from March, the National Assn. of Realtors said Thursday. And last week, the Commerce Department reported that housing starts soared 13.2% last month.
“I am cautiously optimistic,” economist Stephanie Karol of IHS Global Insight said. “I do expect things to get better.”
Although Wall Street cheered Friday’s new-home sales data — the Standard & Poor’s 500 index climbed to a record — it’s unclear whether it represents a one-month anomaly. Furthermore, new home sales, based on contracts signed, are often revised sharply.
The housing market cooled last summer and this winter after a robust recovery in the first half of 2013. As mortgage rates rose and prices surged, would-be buyers struggled to afford a home. Severe weather across much of the country further depressed winter sales. The slowdown tempered the outlook for the spring selling season and dampened hopes that the housing market would supercharge the larger economic recovery.
But a turnaround may be coming. The country added 288,000 new jobs last month, the most in more than two years. The number of homes for sale is on the rise and mortgage rates have stabilized. Rates fell this week with lenders, on average, offering a 30-year-fixed mortgage at 4.14% — the lowest rate since October, according to mortgage finance giant Freddie Mac.
That could entice more buyers off the sidelines who are likely to find homes that aren’t appreciating in value as fast as last spring.
That’s already happening, said Amber Dolle, a San Fernando Valley real estate agent. She said she’s getting calls from people who had wanted to purchase a house last year but decided to wait out the frenzy. “The phone is ringing a little bit more,” she said.
Scott Laurie, chief executive of Southern California home builder Olson Co., says he’s seeing strong demand for new homes as well. An improving economy, tight inventory and falling mortgage rates have buyers touring Olson’s model homes, he said.
Last week, the Seal Beach firm held a grand opening for a new 21-home community in Claremont, 33 miles east of downtown Los Angeles. Laurie said 82 families visited and four purchased houses.
“Things are looking good,” Laurie said.
The national increase in new-home sales last month came largely from the Midwest, where sales surged 47.4%. Sales dropped 26.7% in the Northeast. They rose 3.1% in the South, and remained flat in the West, a major home building region.
There are still signs of underlying weakness in the market, economists said. In an indication that affordability remains a problem, sales of previously owned single-family homes barely rose in April. Most of the month’s gains came from less expensive condos and co-ops. Single-family home builders remain pessimistic, and sales of new and previously owned homes are still down from a year earlier.
“I don’t get the sense we’ve got our groove back,” said Mark Zandi, chief economist at Moody’s Analytics.
There’s still too few first-time buyers able to purchase a home, Zandi said. Many of those would-be buyers are struggling with student debt and their inaction is holding down sales as investors pull back.
Karol of IHS Global Insight said too many people are still struggling economically, preventing a quick turnaround, but predicted that the housing market will slowly improve from the recent slowdown.
“The driver here on out is going to be job growth and income growth,” she said.