WASHINGTON (AP) — A surprisingly strong pace of new-home sales last month has boosted hopes that the spring buying season will be solid enough to lift the overall economy.
Sales of new homes rebounded in January to the fastest rate in more than five years. The strength in purchases followed a slowdown that had been linked to higher mortgage rates and severe winter weather.
The report Wednesday from the Commerce Department helped support stock prices, especially shares of homebuilders.
Many economists predict that sales of both new and existing homes will rise in 2014, lifted by an improving economy and steady job growth.
"Despite higher mortgage rates, the fundamentals for new-home sales and residential construction are solid," said Stuart Hoffman, chief economist at PNC Financial Services Group. "The economy is adding jobs and incomes are growing, making households more confident."
Sales of new homes rose 9.6 percent in January to a seasonally adjusted annual rate of 468,000. It was the fastest pace since July 2008.
The surge came as a surprise to economists. Most had expected a decline in January, in part because they thought purchases would be held back by winter storms in much of the country. Sales had fallen 3.8 percent in December and 1.8 percent in November, prompting concerns that the housing recovery might be losing momentum.
Housing, while still a long way from the boom of several years ago, has been recovering over the past two years. Residential construction has grown at double-digit rates over the past two years and contributed about one-third of a percentage point to overall economic growth last year.
Hoffman said he expected construction and sales of new and existing homes to post further gains in 2014, though a bit less than in 2013.
"There is significant pent-up demand for new homes after potential buyers have put off purchases for years because of concerns about the economy," he said.
Hoffman foresees sales of new homes climbing to around 500,000 this year, up from 428,000 in 2013, when sales had risen 16.3 percent to their highest level in five years.
Other economists are even more optimistic. Economists at IHS Global Insight are forecasting that new-home sales will hit 528,000 this year, a 23.4 percent increase over last year.
Continue reading this story on the...