Wednesday, June 25, 2014

WSJ Reports New Home Sales Rising

New-home sales soared in May, but the gains simply put the market back on track to match last year's overall pace, rather than signaled a significant momentum gain.

Home builders, economists and analysts described the May increase as a delayed rebound to normal sales levels after a weak start to the spring selling season, which was hampered by harsh weather and the fitful economic recovery. Many cautioned that one or two more months of strong gains are needed to prove that the housing recovery indeed has gained steam.

The U.S. Commerce Department reported Tuesday that contracts to sell newly built homes in May amounted to a seasonally adjusted annual rate of 504,000, up a heady 18.6% from the rate in April, and up 16.9% from the May 2013 pace.

However, sales on a year-to-date basis show that the May gain simply amounted to catch-up for weak sales earlier in 2014. Builders sold roughly 194,000 homes in this year's first five months, nearly matching the 193,000 from the same period of 2013, Commerce data shows.

Modular Home factories reported the lowest production numbers for the first quarter of this year than they have seen since 2008.  Second quarter seems to be climbing to match site built sales but are still lagging. Many blame the extreme cold weather for the slowdown, especially in the East and Midwest.

Economists noted that the monthly Commerce figures can be volatile and prone to later revisions. The April-to-May increase of 18.6% was the steepest one-month jump in new-home sales since January 1992, but it came with a margin of error of plus or minus 17.3 percentage points.

Some economists said the May increase indicates a general rebound in consumer confidence. U.S. job growth has returned to healthy levels, with more than 200,000 jobs added in each of the past four months. Interest rates on 30-year, fixed-rate mortgages remain historically low at roughly 4.17%. And home builders generally are more confident now than earlier in 2014.

However, entry-level buyers remain largely sidelined by stringent mortgage-qualification standards and tepid wage growth, economists said.

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