WASHINGTON (Reuters) - New U.S. single-family home sales recorded their biggest gain in 24 years in April, touching a more than eight-year high as purchases increased broadly, a sign of growing confidence in the economy’s prospects.
Tuesday’s report from the Commerce Department, which also showed a surge in new home prices to a record high, offered further evidence of a pick-up in economic growth that could allow the Federal Reserve to raise interest rates soon.
“Consumers are taking the leap and buying the biggest of big ticket items of their lives and this speaks to confidence. The Federal Reserve can raise rates at their June meeting without fear the economy is going to slow,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
New home sales jumped 16.6 percent to a seasonally adjusted annual rate of 619,000 units, the highest level since January 2008. The percent increase was the largest since January 1992.
Data for February and March were revised to show 39,000 more units sold than previously reported. Economists had forecast new home sales, which account for about 10.2 percent of the housing market, rising to only a 523,000 unit-rate last month.
New home sales increased broadly, with the exception of the Midwest. April’s increase, however, probably exaggerates the housing market strength given that homebuilders confidence has stagnated since rising in January.
New home sales are extremely volatile month-to-month and preliminary figures are subject to large revisions because they are mostly drawn from building permits data. Still, last month’s gain pushed new home sales well above their first-quarter average of 531,667 units.
The new home sales report came in the wake of fairly upbeat data on home resales and residential construction. It also added to retail sales and industrial production reports in suggesting that the economy was gathering speed after growth slowed to a 0.5 percent annualized rate in the first quarter.
Minutes from the Fed’s April 26-27 policy meeting, published last week, showed most officials considered it appropriate to raise rates in June if data continued to point to an improvement in second-quarter growth. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.
The PHLX housing index .HGX hit a one-month high on the new home sales data, with shares in the nation’s largest homebuilder, D.R. Horton Inc (DHI.N), increasing 4.3 percent and Lennar Corp (LEN.N) jumping 4.7 percent.
Toll Brothers (TOL.N) shares vaulted 7.6 percent, also boosted by a nearly 31 percent surge in quarterly revenue after the homebuilder sold more luxury homes at higher prices.
The dollar was trading higher against a basket of currencies while prices for U.S. government debt fell.
The housing market is being underpinned by a tightening labor market, which is starting to lift wages, as well as still very low mortgage rates. But a shortage of properties available for sale remains a hurdle and house prices have risen faster than wages, sidelining some first-time buyers.
“The spring home buying season is in full swing as builders have been picking up steam through the first quarter,” said Bill Banfield, vice president at Quicken Loans in Detroit.
“While the large jump in new home sales is encouraging, I would look for a normalization in the coming months that shows a slow but steady increase in the health of the housing market.”
Last month, the inventory of new homes on the market fell 0.4 percent to 243,000. At April’s sales pace it would take 4.7 months to clear the supply of houses on the market, down from 5.5 months in March.
With supply tight, the median price for a new home increased 9.7 percent from a year ago to a record $321,100. The average price rose 13.5 percent from a year earlier to $379,800. New single-family homes sales soared 15.8 percent in the populous South to the highest level since December 2007. In the Northeast, sales jumped 52.8 percent to their highest level since October 2007.
Sales in the West, which have been volatile in recent months, rose 18.8 percent after plunging 15.2 percent in March. The West has seen a sharp increase in home prices amid tight inventories. Single-family homes sales fell 4.8 percent in the Midwest.
Reporting by Lucia Mutikani; Editing by Andrea Ricci