WASHINGTON - 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
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
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
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
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 U.S.
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.