The Wall Street Journal

23 May 2012

Sales of newly built homes in the U.S. grew faster than expected in April and home prices posted a solid gain the prior month, adding to the increasing momentum for the long-struggling sector.

New single-family home sales rose 3.3% from March to a seasonally adjusted annual rate of 343,000, the Commerce Department said Wednesday. That rate was better than the 335,000 pace economists surveyed by Dow Jones Newswires had forecast and 9.9% higher than a year earlier.

Meanwhile, home prices rose 1.8% on a seasonally adjusted basis in March from a month earlier, according to the Federal Housing Finance Agency’s monthly home-price index.

The “reports add to the steady flow of positive news on the housing market, underscoring that this beleaguered sector may finally be turning an important corner,” said Millan Mulraine, an analyst with TD Securities USA LLC.

Still, the pace of April new-home sales was far below historical levels. Since 1963, an average of 671,000 new single-family homes were sold per year in the U.S. Last year’s level of 306,000 sales was the lowest on record.

Wednesday’s report showed the number of new homes listed for sale at the end of April was 146,000. The supply would take 5.1 months to deplete at the current sales pace. Only 46,000 new homes were completed in April, the lowest amount on record, but dwindling inventories could boost future building.

The trend could “lead to a moderate pick-up in new single-family housing starts later this year” which would cause residential construction to contribute positively to economic growth in coming quarters, said Michael Gapen, an analyst with Barclays.

Residential investment hasn’t been a positive contributor to gross domestic product since 2005.

Home builder Toll Brothers Inc. on Wednesday reported to a bigger-than-expected profit. For the quarter ended April 30, Toll reported a profit of $16.9 million, or 10 cents a share, compared with a loss of $20.8 million, or 12 cents a share, a year earlier.

“The housing market has moved into a new and stronger phase of recovery as we have experienced broad-based improvement across most of our regions over the past six months,” said Chief Executive Douglas C. Yearley Jr., in the premarket statement.

Rising prices for existing homes also could be a positive development for builders that have struggled to sell new homes, which tend to cost more, when many markets were flooded with cheap foreclosed properties. However, the proportion of distressed properties to total sales is falling, helping prices to rise.

The FHFA report found that home prices were up 2.7% in March compared to a year earlier.

On a quarterly basis, home prices rose 0.6% in the January-March period from the last quarter in 2011. They were up 0.5% from the same quarter in 2011, the first year-over-year increase since the second quarter of 2007.

The FHFA’s index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae and Freddie Mac. A reading of 100 is equal to the price of homes in January 1991. March’s index value was 185.6.