Purchases of new homes climbed in February for the fourth time in the past five months as demand snapped back in the western United States.
Sales climbed 2% to a 512,000 annualized pace after a 502,000 rate in January that was stronger than previously reported, Commerce Department figures showed March 23. Demand is in line with last year’s pace, indicating residential construction will remain a source of support for the economy.
Low mortgage rates and a labor market that’s added almost a quarter of a million workers a month on average over the past two years is giving Americans the confidence and means to buy a home. Increased availability of entry-level properties would help persuade lower-income and first-time buyers to move off the sidelines and give the industry an added boost.
“We do expect a pretty healthy spring selling season, with income growth rising pretty solidly and consumer confidence holding in,” Kevin Cummins, an economist at RBS Securities Inc. in Stamford, Connecticut, said before the report. “We expect that sales will grind higher as the year goes on.”
The data are volatile month-to-month, and the February figure should be considered preliminary. The report said there was 90% confidence the change in sales last month ranged from a 16.8% drop to a 20.8% increase.
The median estimate in a Bloomberg News survey called for a 510,000 rate. Economists’ estimates ranged from sales rates of 475,000 to 550,000 after a previously reported 494,000 in January. Purchases were 2.8% lower in February than the same period in 2015 on an unadjusted basis, the Commerce Department’s report showed.
The increase in February was entirely due to a 38.5% surge in the West, the biggest gain since December 2010. Sales in that region had dropped 32.7% a month earlier.
Purchases last month declined in the other three U.S. regions, with the biggest retreats in the Midwest and Northeast.
There were 240,000 new houses on the market at the end of last month. While little changed from 236,000 in January, it was the most since October 2009. The supply of homes at the current sales rate held at 5.6 months.
The median sales price increased 2.6% last month from a year ago to $301,400.
New-home sales, which accounted for about 9% of the residential market last year, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Closings on those previously owned homes — which usually take place a month or two after a contract is signed — decreased 7.1% in February to a three-month low of 5.08 million annual rate, the National Association of Realtors said March 21. Purchases decreased in all four regions, led by a 17.1% drop in the Northeast and a 13.8% decline in the Midwest.
Homebuilder confidence also has faded this year, holding in March at a nine-month low as sales prospects waned.
The industry and potential buyers still can take comfort that borrowing costs will remain low. Federal Reserve policymakers last week held off on raising their benchmark interest rate and scaled back forecasts for how high they’ll go this year. Fed officials are waiting to assess how slowing global growth and shaky financial markets will affect the U.S. recovery.
The average rate of a 30-year, fixed-rate mortgage was 3.73 in the week ended March 17, according to data from the Federal Home Loan Mortgage Corp., or Freddie Mac. That compares with a 3.31% rate reached in late 2012 that was the lowest in records back to 1971.