Sales of new homes rose in September for a second month to a pace that signals the industry is struggling to overcome the effects of a jobless rate hovering near 10 percent.
Purchases increased 6.6 percent to a 307,000 annual rate that exceeded the median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. Demand is hovering near the record-low 282,000 reached in May.
A lack of jobs is preventing Americans from gaining the confidence needed to buy, overshadowing declines in borrowing costs and prices that are making houses more affordable. At the same time, foreclosure moratoria at some banks, including JPMorgan Chase & Co., signal the industry will redouble efforts to tighten lending rules, which may depress housing even more.
“These are still very low levels,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Ultimately, a significant recovery in housing will depend on a clear pickup in employment.”
Another Commerce Department report today showed orders for non-military capital equipment excluding airplanes dropped in September, indicating gains in business investment will cool.
Capital Goods Demand
Bookings for such goods, including computers and machinery meant to last at least three years, fell 0.6 percent after a 4.8 percent gain in August that was smaller than previously estimated. Total orders climbed 3.3 percent last month, led by a doubling in aircraft demand.
Stocks fell, snapping a five-day gain for the Standard & Poor’s 500 Index, on the durable goods report and investor speculation that steps taken by the Federal Reserve to shore up the economy will be gradual. The S&P 500 fell 0.5 percent to 1,179.8 at 10:14 a.m. in New York.
Economists forecast new home sales would increase to a 300,000 annual pace from a 288,000 rate in August, according to the median of 73 survey projections. Estimates ranged from 270,000 to 330,000.
The median price increased 3.3 percent from September 2009 to $223,800.
Purchases rose in three of four regions, led by a 61 percent jump in the Midwest. Purchases dropped 9.9 percent in the West.
The supply of homes at the current sales rate fell to 8 months’ worth, down from 8.6 months in August. There were 204,000 new houses on the market at the end of September, the fewest since July 1968.
Reports earlier this month showed the housing market is hovering at recession levels. Housing starts increased in September to an annual rate of 610,000, the highest since April, while building permits fell to the lowest level in more than a year, signaling construction will probably cool.
Sales of existing homes, which now make up more than 90 percent of the market, increased by 10 percent to a 4.53 million rate in September, the National Association of Realtors said yesterday. The pace was still the third-lowest on record going back a decade.
Home resales are tabulated when a contract is closed, while new-home sales are counted at the time an agreement is signed, making them a leading indicator of demand.
Economists are debating the likely effect on new-home sales from the foreclosure moratoria and regulators’ probes into faulty paperwork. Most agree the moratoria pose a risk to housing sales as a whole.
Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York, is among those who say the moratoria, by limiting the supply of existing homes, may lift demand for newly built houses in coming months.
“There is a possibility there will be a shift in demand for new construction, at least in the short term,” she said.
The U.S. central bank and other regulators are “intensively” examining financial firms’ home-foreclosure practices and expect preliminary findings next month, Fed Chairman Ben S. Bernanke said this week at a housing conference in Arlington, Virginia.
Fed officials have signaled they may start another round of unconventional monetary easing at their next meeting Nov. 2-3 to try to spur the economic recovery.
Homebuilders say labor-market conditions will be the biggest factor in spurring or delaying a recovery.
“The U.S. economy needs to improve, and we’ve got to see some improvement in job creation,” Larry Sorsby , chief financial officer at Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, said during an Oct. 7 conference call.
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- Home Prices in 20 U.S. Cities Rise Less Than Forecast (businessweek.com)
- U.S. Economy: Confidence Increases More Than Forecast (businessweek.com)
- New home sales rise 6.6 pct. after dismal summer (sfgate.com)
- WRAPUP 3-U.S. existing home sales rise, supply edges down (reuters.com)
- U.S. Existing Home Sales Rise More Than Forecast (businessweek.com)