US new home sales hit fastest pace in 5 years

Tuesday, June 25th, 2013 | Finance News

WASHINGTON (AP) — Sales of new homes rose in May to the fastest pace in five years, a solid gain that added to signs of a steadily improving housing market.

New home sales rose 2.1 percent last month compared with April to a seasonally adjusted annual rate of 476,000, the highest level since July 2008, the Commerce Department reported Tuesday.

The median price of a new home sold in May was $263,900, up 3.3 percent from a year ago.

Sales of new homes remain below the 700,000 annual rate that's considered healthy by most economists. But the pace has increased 29 percent from a year ago.

Analysts say the housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some drag from higher taxes and federal spending cuts.

The sales gains in May were led by a 40.7 percent increase in the Midwest followed by a 20.7 percent gain in the Northeast. Sales were also up 3.6 percent in the West but they fell 9 percent in the South.

The inventory of unsold homes rose 2.5 percent to 161,000 in May, the highest level since August 2011 but still just 13 percent higher than the record low for inventories set in July 2012. Prices of new homes have been rising in part because more people are bidding on a limited number of homes.

The National Association of Realtors reported last week that sales of previously occupied homes surpassed 5 million in May. It was the first time that's happened in 3½ years.

Sales of previously owned homes rose to an annual rate of 5.18 million in May. The last time sales had exceeded 5 million was in November 2009, a month when the pending expiration of a home-buying tax credit briefly inflated sales

Steady hiring and low mortgage rates have encouraged more people to buy homes. And with demand up, prices rising and few homes on the market, builders have grown more optimistic about their prospects, leading to more construction and jobs.

Last week, Federal Reserve Chairman Ben Bernanke cited the housing gains as a major reason the Fed's economic outlook has brightened.

Still, mortgage rates have jumped in recent weeks. And they're expected to rise further now that the Fed has signaled it plans to scale back its bond purchases this year if the economy continues to strengthen. A pullback in the bond purchases would likely send long-term borrowing rates up. Higher mortgage rates could slow some of the housing market's momentum.

For now, a brighter outlook for housing has made builders more optimistic. The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 52, up from 44 in May.

That was the highest reading in more than seven years and the largest monthly increase in more than a decade. A reading above 50 indicates that more builders view sales conditions as good rather than poor.

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Consumer confidence highest in over five years in June

Tuesday, June 25th, 2013 | Finance News

NEW YORK (Reuters) - Consumer confidence jumped in June to its highest level in over five years as Americans were more optimistic about business and labor market conditions, according to a private sector report released on Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes rose to 81.4 from a downwardly revised 74.3 the month before. It was the highest since January 2008 and beat expectations for 75.4.

May was originally reported as 76.2.

(Reporting by Leah Schnurr; Editing by Chizu Nomiyama)

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New home sales near five-year high, prices rise

Tuesday, June 25th, 2013 | Finance News

WASHINGTON (Reuters) - Sales of new U.S. single-family homes rose to their highest level in nearly five years in May, confirming the housing market's strengthening tone.

The Commerce Department said on Tuesday sales increased 2.1 percent to a seasonally adjusted annual rate of 476,000 units - the highest level since July 2008. It was the third straight month of gains in new home sales.

Sales increased 3.3 percent in April. Economists polled by Reuters had expected new home sales to rise to a 462,000-unit rate last month.

Compared with May 2012, sales were up 29 percent.

Home sales data will be closely watched in the coming months for signs of strain from the rise in mortgage rates.

The housing market recovery, which is helping to soften the blow on the economy from tight fiscal policy, has been largely driven by record-low mortgage rates, thanks to the Federal Reserve's generous monetary stimulus.

The Fed last week said it expected to start slowing the pace of its bond-buying program later this year, bringing it to a halt around the middle of 2014. That has pushed up mortgage rates, which had already been rising since early May.

Economists do not believe the increase in mortgage rates is sufficient to undo the housing market recovery. Data last week showed confidence among home builders spiked to a seven-year high in June and they were upbeat about sales over the next six months and prospective buyer traffic.

Last month, the inventory of new homes on the market increased 2.5 percent to 161,000 - the highest since August 2011 - as builders ramp up production to meet the growing demand.

Still, supply remains tight, putting upward pressure on prices. The median new home price increased 10.3 percent from a year ago.

At May's sales pace it would take 4.1 months to clear the houses on the market, up from 4.0 months in April. A supply of 6.0 months is normally considered as a healthy balance between supply and demand.

Sales last month were up in the Northeast, Midwest and West. They fell in the South. Sales in the Midwest were the highest since November 2007.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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