WASHINGTON (Reuters) - The U.S. spring home-selling season got off to a strong start in April with rising sales and prices providing evidence that a housing market recovery was gaining some traction.
The housing sector has been the Achilles’ heel of the economy ever since the home-price bubble burst.
Data this week, however, have painted a relatively upbeat picture for the market and underscored the economy’s resilience.
“The recent buoyancy in housing market activity has raised hopes that this beleaguered sector may finally be on the verge of a rebound,” said Millan Mulraine, senior macro strategist at TD Securities in New York.
New home sales increased 3.3 percent to a seasonally adjusted 343,000-unit annual rate, the Commerce Department said on Wednesday. Compared to April last year, sales were up 9.9 percent.
The report came on the heels of news on Tuesday that home resales hit a two-year high, with the sector getting support from investors who are increasingly seeing value.
Even more encouraging, the median price for both new and previously owned homes surged last month, a further sign of life for a market that has struggled to come back from its 2006 collapse.
The improving tone could be a boon for President Barack Obama whose housing policies have been decried for doing too little to help distressed homeowners.
Rising home prices could help households repair their finances, which were shattered when the housing bubble burst.
The median price of a new home rose to $235,700 last month, up 4.9 percent from a year ago.
A separate report from the Federal Housing Finance Agency showed house prices in March were up 2.7 percent from a year ago, the largest gain since November 2006. The increase reflected a 1.8 percent rise in March from February, the biggest monthly jump on records dating to 1991.
Still, prices by FHFA’s measure remain about 18 percent below the peak reached in April 2007. Other measures suggest prices have even further to rise to make up the lost ground.
The improving housing market picture helped Toll Brothers Inc, the largest luxury home builder, report a higher-than-expected quarterly profit and a strong jump in new orders.
“The spring selling season has been the most robust and sustained since the downturn began,” Chief Executive Douglas Yearley said in a statement.
Despite the rise in sales, the market continues to be hamstrung by an oversupply of previously owned homes - especially from foreclosures, many of which sell well below their market value.
New home sales account for about 7.6 percent of the overall housing market and face stiff competition from previously owned homes even though builders are carefully managing inventory.
While the inventory of new homes on the market rose 1.4 percent to 146,000 units last month, it remained near record lows. At April’s sales pace it would take 5.1 months to clear the houses from the market, down from 5.2 months in March.
“This should support new construction in time and is consistent with our view that residential construction should contribute positively to GDP growth in coming quarters,” said Michael Gapen, an economist at Barclays in New York.
New home sales last month were buoyed by a 28.2 percent jump in the Midwest. Sales in the Northeast rose 7.7 percent, to the highest level in over a year, while in the West sales soared 27.5 percent. Sales were down 10.6 percent in the South.
A separate report from the Mortgage Bankers Association showed applications for loans to buy houses fell for a second straight week last week, even though mortgage rates dropped to a record low.
Signs of recovery in the housing market have spurred interest from some big-name investors. Oliver Chang, the head of U.S. housing strategy at Morgan Stanley, announced this week that he was departing to start a buy-to-rent housing fund.
They have also raised the appetite for private label residential mortgage-backed securities among investors rattled by broader market volatility.
Additional reporting by Melissa Bland; Editing by Neil Stempleman