Purchases of new homes increased in February to a seven-month high, indicating the effects of the recent rise in borrowing costs on the U.S. residential real estate market have been modest.
Sales rose 6.1% to a 592,000 annualized pace, Commerce Department data showed March 23. The median forecast in a Bloomberg News survey called for a 564,000 rate. Warmer winter weather probably played a role in boosting demand as purchases in the Midwest surged by the most since October 2012.
The pace of new single-family home purchases is building on a solid 2016, which was the strongest in nine years. Resilient job growth and steadily improving household balance sheets continue to underpin demand as they allow some buyers to withstand higher mortgage rates.
Last month was the strongest reading for a February since 2008. Estimates in the Bloomberg survey ranged from 543,000 to 600,000. The Commerce Department revised the January reading to a 558,000 pace from a previously estimated 555,000.
The Commerce Department said there was 90% confidence that the change in sales last month ranged from an 11.2% drop to a 23.4% increase, underscoring the volatility of the data.
The pickup in demand last month was led by a 30.9% jump in the Midwest. That put the annualized rate of sales in the region at 89,000 in February, the strongest pace since November 2007. Purchases also increased in the West and South.
Last month was the second-warmest February on record, according to the National Oceanic and Atmospheric Administration.
The supply of homes declined to 5.4 months, from 5.6 months in January. There were 266,000 new houses on the market at the end of February.
The median sales price of a new house dropped 4.9% from February 2016 to $296,200.
New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Purchases of previously owned homes eased last month from the highest level in a decade, the National Association of Realtors’ report on contract closings showed March 23. Sales dropped 3.7% to a 5.48 million annual rate amid the leanest inventory on record for any February.
Mortgage rates have marched higher since the November election and are approaching a three-year high on speculation fiscal policies will be adjusted to spur economic growth and as the Federal Reserve raises borrowing costs.
The average rate on a 30-year, fixed mortgage climbed to 4.3% in the week ended March 16, up from 3.54% in early November, according to Freddie Mac figures.