WASHINGTON – More Americans bought new homes in April — evidence that the stronger job market is powering the housing sector.
The Commerce Department said Tuesday that new-home sales climbed 6.8 per cent last month to a seasonally adjusted annual rate of 517,000. Sales recovered from a 10 per cent dip in March to an annual pace of 484,000.
The gains point to the positive momentum created by robust hiring over the past year. Employers have added more than 3 million jobs as the unemployment rate has steadily dropped to 5.4 per cent. Those new paychecks are now starting to trickle into the real estate sector, as more people are shopping for homes.
Sales during the first four months of the year are 23.7 per cent higher than the same period in 2014, although the monthly figures tend to be volatile.
Rising demand has created a supply crunch. The market has a modest 4.8-month supply of new homes, sharply below the average of six months that economists say indicates a healthy market. The limited inventory has pushed up prices. Over the past 12 months, the median sales prices has risen 8.3 per cent to $297,300.
As homes grow more expensive, it could eventually stifle buying. Sales increased in the Midwest and South last month, while slumping in the Northeast and West where housing costs are generally higher.
“Continued low housing inventory could be a hindrance to the housing market moving forward, putting upward pressure on prices and deterring prospective buyers,” said Derek Lindsey, an analyst at the bank BNP Paribas, in a client note.
Construction firms are meeting some of the additional demand.
Homebuilders broke ground on more houses and apartment complexes in April, a sign that they’re gearing up for more sales. The annual pace of housing starts jumped 20.2 per cent from March to 1.14 million, the highest rate since November 2007, a month before the recession began. There was also a 10.1 per cent increase in approved building permits, which suggests that construction levels should continue to improve.
Some of these gains have come as the real estate sector rebounds from a brutal winter, which shut down construction sites and slowed buyer traffic at open houses. But the increase in sales points to more Americans aggressively seeking to buy existing homes.
Sales of existing homes fell slightly between April and March largely because of limited inventory on the market. They sold at an annual clip of 5.04 million last month, the National Association of Realtors reported last week. But the inventory of homes listed for sale has dropped nearly 1 per cent over the past year, meaning that potential buyers have fewer choices.
The shortage of listings has caused homes to sell more quickly and for higher prices.
Existing-homes sold on average in 39 days last month, versus 52 days in March and 62 days in February, the Realtors said. New construction generally costs more than existing housing stock, but the price pressures are similar on both segments of the real estate market.
Nationwide, the median price of an existing home surged 8.9 per cent over the past 12 months to $219,400. That’s more than four times faster than average hourly wage growth.
New construction will likely respond too slowly to immediately meet this demand, developers say.
But previous monthly job gains and the low mortgage rates have helped usher more would-be buyers into the market.
Average 30-year fixed rates were 3.84 per cent last week, according to the mortgage giant Freddie Mac. That average has risen slightly in recent weeks, but it has dropped from 4.14 per cent last year.