New home sales reach 8-year high

April’s 16% rise bodes well for year

In this Wednesday, May 18, 2016, photo, a "Sold" sign rests in front of a house under construction, in Walpole, Mass.
In this Wednesday, May 18, 2016, photo, a "Sold" sign rests in front of a house under construction, in Walpole, Mass.

WASHINGTON -- Americans ramped up their purchases of new homes in April to the highest level since January 2008, evidence of a strong start to the spring buying season.

The Commerce Department said Tuesday that new home sales jumped 16.6 percent last month to a seasonally adjusted rate of 619,000, up from a revised total of 531,000 in March.

"The outlook for housing is very strong for the remainder of the year, even with the prospect for modestly higher interest rates and relatively modest pace of economic expansion," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "There was a little bit more inventory at the upper price points, and you might be seeing some people nudged off the fence by the prospect of higher interest rates."

Steady job gains and low mortgage rates have encouraged more Americans to buy new homes. That trend is driving housing construction and helping support the economy.

The new-home sales figures are notoriously volatile, particularly at the regional level. Last month, new-home purchases leapt 53 percent in the Northeast and 19 percent in the West. They fell 5 percent in the Midwest and jumped 16 percent in the South.

The housing market is still healing from the long-term consequences of the bubble and bust a decade ago. Last month's sales aren't far from the historical long-run pace of about 650,000 a year.

Developers have been targeting higher-income buyers: The median price of a new home that sold in April was $321,100, a record high, up from $297,900 in March. Of the new homes sold in April, 25 percent were priced from $300,000 to almost $400,000.

Those sharp price gains will likely put many new homes out of reach for some buyers, particularly younger first-time purchasers.

Still, more building is expanding the supply of homes available for sale, which could help relieve some pricing pressure. The number of new homes for sale is 17.4 percent more than a year earlier. That could help offset a shortage of existing homes for sale, which have fallen 3.6 percent in the past year.

The housing market is showing signs of picking up after a weak start to the year, though growth remains modest. Lower mortgage rates are helping. The average 30-year fixed-rate mortgage was just 3.58 percent last week, according to mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp.

"Easier credit conditions mean that the sustained surge in employment is finally boosting the pool of potential buyers who can qualify for mortgages," Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a research note. "We don't now expect sales to rise much further in the short-term, but we do hope the trend can be established around the 600K mark over the next few months."

Sales of previously owned homes, which make up 90 percent of the housing market, rose in April for a second straight month to an annual pace of 5.45 million, a figure consistent with a solid economy.

And the construction of new homes rose 6.6 percent in April to an annual rate of 1.17 million houses and apartments. That mostly reversed a steep drop in March. Builders are breaking ground on new homes at a faster pace than they did last year.

Information for this article was contributed by Christopher S. Rugaber of The Associated Press and by Michelle Jamrisko of Bloomberg News.

A Section on 05/25/2016

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