WASHINGTON – Sales of new U.S. homes in February climbed to their fastest pace in seven years, as an otherwise dormant housing market showed fresh signs of life.
The Commerce Department said Tuesday that new-home sales shot up 7.8 per cent last month to a seasonally adjusted annual rate of 539,000, the strongest performance since February 2008. January sales were revised up nearly 4 per cent to a rate of 500,000.
Other parts of the housing market have struggled since 2015 got off to a frigid start, despite historically low mortgage rates and a sharp, yearlong upswing in hiring. The shift upward in purchases of newly built homes may suggest that the job growth is spilling over to other parts of the economy.
The strong increase came from the South and, surprisingly, the Northeast, which was hammered by snowstorms last month. The median sales price rose 2.6 per cent since February 2014 to $275,500.
Still, fierce winter weather has led builders to pull back on the pace of single-family housing starts and shutter construction sites. And sales of existing homes in the first two months of 2015 are running behind the already weak pace set last year, according to the National Association of Realtors.
Housing starts plummeted a seasonally adjusted 17 per cent last month from January, with the biggest drops coming in the snowbound Northeast and Midwest, the Commerce Department reported last week.
Builders have also been more focused on the rental market, as high prices have cut into the pool of potential buyers. Approved permits in February to start construction on single-family houses fell to their lower annual rate in eight months, while permits for apartments surged to a 10-month high.
But the increase in sales of newly built homes indicates that construction may need to ramp up. Just 4.7 months’ supply of new homes are on the market, a sign that inventories are unusually tight before the start of the spring buying season when open houses become more crowded and sales increase.
The supply of existing homes is also tight, with an available supply of just 4.6 months compared to a historic average of around 6 months, the Realtors said Monday. The shortage of listings has caused prices of existing homes to climb 7.5 per cent over the past year to a median of $202,600, pricing out many would-be buyers who lack the income needed to save for a down payment.
Because of limited supply and rising prices, existing homes sold at annual pace of 4.88 million homes in February, slightly below last year’s pace of 4.93 million.
Still, historically low mortgage rates and rock solid job growth has raised expectations among many economists of home sales continuing to improve with the weather.
Over the past 12 months, employers have been adding roughly an average of about 275,000 new jobs each month, as the unemployment rate has fallen to 5.5 per cent from 6.7 per cent, according to the Labor Department. The hiring has increased the total number of paychecks in the economy and the potential number of homebuyers.
Average 30-year fixed rates were 3.78 per cent last week, according to the mortgage giant Freddie Mac. That average has plunged from a 52-week high of 4.41 per cent, which should help to make housing more affordable.