New Home Sales Increase
Here’s the latest sign that the housing market is healing and that there is indeed a spring awakening. Americans bought more new homes last month, increasing sales by 3.3 percent.
On a seasonally adjusted annual rate, that’s 343,000 homes, according to the Commerce Department. The numbers are a welcome surprise after years of depressing show. Sales rose in every region of the country except the South.
In April, new homes sales skyrocketed 28 percent in the Midwest and the West, when compared to the previous month. In the Northeast, sales climbed 7.7 percent. The median home prices in the same period rose to $235,700.
‘‘Housing could be a pleasant surprise this year,’’ Ellen Zentner, a senior economist at Nomura Securities, told the AP.
The news puts builders in a celebratory mode. New homes sales were the worst hit in the housing sector after a depressed economy pushed down home prices and clogged the market with an abundant supply of foreclosed homes. This came at a time when homeowners grappled with unemployment, missed mortgage payments and declining home equity.
The struggle still continues. Despite the great showing in April, sales are half the rate of what’s considered to be a sign of a healthy market. But any increase is a step in the right direction.
Builder Reports Profits in Second Quarter
Increase in new home sales translates to demand for new homes. Luxury home builder Toll Brothers beat analysts’ estimates and reported profits in its second quarter earnings, indicating further signs that the housing market is probably off of life support.
Net income, a key performance measure, was $16.9 million or 10 cents a share for the quarter that ended in April. According to a Bloomberg survey, analysts were expecting a profit of 3 cents a share.
“It appears that the housing market has moved into a new and stronger phase of recovery,” Toll’s chief executive, Douglas C. Yearley Jr., said in a statement, according to Bloomberg. “The spring selling season has been the most robust and sustained since the downturn began.”
New home sales are on the rise because of improving employment numbers, decreasing home prices and historically low mortgage rates. With signs of a stabilizing economy, wealthy consumers are once again opening up their purse strings and investing in up-market homes. Toll Brothers said quarterly orders skyrocketed 47 percent compared to a year earlier.
“Orders were the belle of the ball,” Stephen East, an analyst with the International Strategy and Investment Group, wrote in a note, according to Bloomberg. “This sits distinctly at the top of our rosy expectations.”
Existing Home Sales on the Rise
Rising demand boosted existing home sales in April, according to numbers released by the National Association of Realtors®. Completed transactions on single-family homes, townhomes, condominiums and co-ops rose 3.4 percent in April to an adjusted annual rate of 4.62 million, NAR said.
“It is no longer just the investors who are taking advantage of high affordability conditions,” said Lawrence Yun, chief economist at NAR in a release. “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.”
Yun said that the downtrend in listed and shadow inventory has shifted the trend from a buyers’ market to one that is much more balanced. Some areas are already experiencing a seller’s market, he said.
“We are making incremental progress,” Millan Mulraine, a senior U.S. strategist at TD Securities Inc. in New York, who correctly forecast the sales pace, told Bloomberg. “People are becoming more confident about job prospects and about taking on mortgages. This is all positive for the economy.”
The number of signed contracts increased to the highest level since April 2010, the Associated Press reported. The really good news is more first-time buyers are getting into the market, making up 35 percent of sales in April.
The sales pace in April was in line with the 4.61 million median forecast in a Bloomberg News survey, the wire service said.