Sales of new homes in the US rose in January to the highest level since July 2008 and home prices ended 2012 with the biggest annual gain in more than six years, signalling continued momentum in the country’s housing market recovery.
The figures came as separate data showed consumer confidence picked up at a stronger than expected pace this month.
Sales of single family homes surged 15.6 per cent to a seasonally adjusted annual rate of 437,000 last month, commerce department data showed. This exceeded expectations of 381,000 and the prior month’s upwardly revised 378,000 level.
Record low mortgage interest rates, a slowly improving jobs market and the bottoming out of home prices have spurred many homebuyers to move ahead with purchases.
The number of homes for sale at the end of January was around 150,000, a supply of 4.1 months worth at current sales rates. This is the lowest since March 2005 and compares with 4.8 months in December.
Separately, the Standard & Poor’s/Case-Shiller home price index, which tracks monthly changes in the value of residential property in 20 metropolitan regions across the US, showed prices rose 0.9 per cent in December on a seasonally adjusted basis – the 11th consecutive increase.
The data beat expectations of a 0.8 per cent gain and the previous month’s 0.7 per cent rise.
“Home prices ended 2012 with solid gains,” says David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Housing and residential construction led the economy in the 2012 fourth quarter.”
Home prices have been on an upward trajectory as the number of foreclosures has declined and the supply of existing and new homes for sale has fallen.
Prices in the 20 cities jumped 6.8 per cent year on year, ahead of a forecast 6.6 per cent rise and the best annual gain since July 2006. Phoenix, San Francisco and Detroit saw the largest increases.
“This is encouraging given that these were some of the areas hit hardest during the housing crisis, and suggests that a broad-based recovery in housing activity and prices remains in place,” said Cooper Howes, economist at Barclays.
Despite housing-market gains, prices remain about 29 per cent below the 2006 peak. While those who can afford it – including investors and cash buyers – have been quick to buy homes, tight credit conditions and tough mortgage requirements are keeping many potential homebuyers out.
However, Gennadiy Goldberg, strategist at TD Securities, said recovering home values would probably continue to help holders of underwater mortgages – those who owe more than their home is worth – with more homeowners becoming eligible for refinancing at lower mortgage rates.
In January 2013, 10.9m US homeowners – representing 26 per cent of all homes with an outstanding mortgage – were seriously underwater, meaning they owed at least 25 per cent more on their home than it was worth, according to RealtyTrac, the housing data provider.
“[Rising house prices] will allow more money to be freed up for spending by consumers – a positive for the economy going forward.” said Mr Goldberg.
Another data release showed consumer confidence picked up at a stronger than expected pace in February as Americans shrugged off worries over the US budget and high petrol prices.
The Conference Board, the business organisation, said its index of consumer attitudes accelerated to 69.6 from a downwardly revised 58.4 in January. Economists surveyed by Bloomberg had expected a level of 61. The latest data were the highest since November.
The survey questions consumers on perceptions of business and employment conditions, as well as expectations for the next six months.
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