New Home Sales Unexpectedly Increase
The U.S. Commerce Department announced this week that sales of single-family homes unexpectedly increased in April, offering some optimism for the long-beleaguered national housing market. The report showed a surprising in crease in home values as well. The agency’s seasonally adjusted index rose 7.3 percent for the month to a pace of 323,000, the highest pace of sales reported since December. It was the second straight month that sales increased, after the agency revised March’s pace up to 301,000.
Analysts in a recent survey conducted by Thomson Reuters had forecast that sales would remain unchanged from the previously announced pace of 300,000 for March. Sales increased across the nation. Led by a 15.1 percent gain in the West. Sales are still lower on a year-to-year basis, at just over 23 percent below last April’s pace, when the housing market was still getting a boost from federal tax credits for home buyers. While economists certainly welcomed the optimistic report, most are not trumpeting the news as evidence the market is nearing a bottom.
Separate reports over the last few weeks on everything from industrial production to consumer spending suggest the overall economy is still struggling to gain a foothold in recovery. Manufacturing activity dipped in May after seven straight months of growth, and the Commerce Department’s report on economic growth in the first quarter disappointed analysts.
A large oversupply of homes listed for sale continues to apply pressure to values, with thousands of foreclosures set to hit the market, bringing prices down even further. These foreclosures and bloated inventory are hindering demand for new homes and slowing new home construction, which usually plays a pivotal role in the economy recovering after a downturn. Economists estimate that every new home built generates at least $90,000 in tax revenue while also creating an average of three new jobs for a year. There were just 175,000 new homes on the market in April, the lowest such figure ever reported and a 2.8 percent dip from the March figure.
While new homes sales rose slightly in April, sales of existing homes fell, as did construction of new homes. The Commerce Department reported that the median sales price for a home purchased in April was $218,000, 1.6 percent higher than the March median but 4.6 percent down from a year ago. At April’s sales pace, there was a 6.5 months supply on the market, the lowest since the same month in 2010, and down from March’s supply of 7.2 months.