WASHINGTON (AP) — U.S. sales of new homes rebounded in
January to the fastest pace in more than five years, offering hopes that
housing could be regaining momentum after a slowdown last year caused
by rising interest rates.
Sales of new homes increased 9.6 percent
in January to a seasonally adjusted annual rate of 468,000, the
Commerce Department reported Wednesday. That was the fastest pace since
July 2008.
The rise came as a surprise to economists who had been
forecasting a sales drop in January, in part because of a belief that
activity would be held back by bad winter storms in many parts of the
country.
Sales had fallen 3.8 percent in December and 1.8 percent
in November, leading to worries that the housing recovery could be
losing momentum.
The big January gain was likely to ease those
concerns. Many economists believe sales of both new and previously
occupied homes will rise in 2014, helped by an improving economy and job
gains which will boost the number of people working.
The median price of a new home sold in January was up 3.4 percent from a year ago to $260,100.
The
sales gain was led by a 73.7 percent surge in sales in the Northeast.
Sales were up 11 percent in the West and 10.4 percent in the South. The
only region to see a sales decline was the Midwest where sales fell 17.2
percent, likely a reflection of winter blizzards that hit the region.
Sales for all of 2013 rose to 428,000, the highest point in five years and an increase of 16.3 percent
from 2012.
Economists expect sales to grow more in 2014 although they do not expect the gain to be as robust as the
2013 increase.
Price
increases are expected to moderate in 2014 as well. The Standard &
Poor’s/Case-Shiller 20-city home price index rose by a healthy 13.4
percent in 2013. That was the largest calendar gain in eight years.
Economists
are looking for further sales gains as the economy continues to gain
momentum and more people are able to get jobs. Further gains in home
sales will spur more jobs in the construction industry and help to
support economic growth.
The National Association of Realtors
reported last week that sales of existing homes plummeted in January to
an annual rate of 4.62 million units. That was down 5.1 percent from the
December pace.
Freezing temperatures and snowstorms caused a slip
in housing activity this winter while higher mortgage rates and higher
prices had acted to slow growth earlier in the year.
The average
rate on a 30-year mortgage rose to 4.33 percent last week, up from 4.28
percent the previous week. Rates surged about 1.25 percentage points
from May through September, peaking at 4.6 percent. Those increases
began after the Federal Reserve signaled last spring that it would
expected to start slowing its bond-buying program before the end of the
year.
Those Fed bond purchases were designed to keep long-term
interest rates low to stimulate more borrowing and give the economy a
boost. The Fed in December and January did announce $10 billion
reductions in its bond purchases, taking them from $85 billion per month
down to $65 billion per month.
It is expected as long as the
economy and the job market keep improving, the Fed will keep reducing
bond purchases in moderate steps until the program is phased out
entirely at the end of this year.
The economy is also expected to
show greater strength with many analysts expecting overall growth to
climb to close to 3 percent this year, up from just 1.9 percent in 2013.
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