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Economy Title: Sales of New Homes in U.S. Jump to Two-Year High on Tax Credit May 26 (Bloomberg) -- Purchases of new homes in the U.S. jumped in April to the highest level in two years as buyers rushed to qualify for a government tax credit before it expired at the end of the month. Sales climbed 15 percent to an annual pace of 504,000, the most since May 2008, after surging a revised 30 percent the prior month, figures from the Commerce Department showed today in Washington. The median sales price dropped 9.5 percent from the same month last year, which may reflect increased demand from first-time buyers seeking the government incentive. To receive a tax credit worth as much as $8,000, contracts had to be signed by the end of April, meaning demand will probably wane in coming months. Rising foreclosures and falling stock prices caused by concern over the European debt crisis may hamper any recovery in sales and construction into the second half of the year. “This is very volatile with the end of the tax rebate,” Yanick Desnoyers, assistant chief economist at the National Financial Bank Group in Montreal, said before the report. “You’ll see a drop in the level of activity” after the credit effect fades. Economists forecast sales would rise to a 425,000 annual rate in April, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from 370,000 to 450,000. The March sales pace was revised up to 439,000 from a previously reported 411,000. Factory Expansion Orders for durable goods rose in April for the fourth time in five months, pointing to strength in U.S. manufacturing at the start of the second quarter, another Commerce Department report showed. The 2.9 percent increase in bookings for goods meant to last at least three years was the biggest in three months and followed little change in March. Orders excluding transportation unexpectedly fell 1 percent last month, coming off a revised 4.8 percent March jump that was the biggest in almost 5 years. Home sales increased in three of four U.S. regions last month, led by a 32 percent jump in the Midwest. Purchases in the Northeast were little changed. The median price of a new home decreased to $198,400, the lowest level since December 2003. The jump in sales was concentrated in houses costing less than $300,000, perhaps reflecting demand from first-time buyers. The supply of homes at the current sales rate dropped to 5 month’s worth, the lowest level since December 2005, from 6.2 months in March. There were 211,000 new houses on the market at the end of April, the fewest since 1968. Existing Homes A report May 24 from the National Association of Realtors showed sales of existing homes jumped to a higher-than-forecast 5.77 million rate in April, while the number of unsold homes on the market surged by the most in a decade. The Obama administration extended an incentive for first- time homebuyers in November and expanded it to include some current owners. The deadline for signing contracts was the end of April, and transactions must close by June 30. Purchases of new houses are tabulated upon contract signings, meaning April was the last month in which the credit could affect demand. Sales of previously owned homes, which account for more than 90 percent of the housing market, are tabulated at contract closings, so the credit may still influence demand through June. Foreclosures, Prices New home sales have seen their share of the entire home purchase market shrink relative to existing home sales, whose prices have been driven down by mounting foreclosures. Foreclosures may reach a record 1.1 million this year, Lawrence Yun, chief economist at the National Association of Realtors, said this week in an interview. Another 600,000 may change hands in so-called short sales, in which banks agree to accept less than the full value of the mortgage, he said. Some homebuilders are seeing a pickup. D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, posted its second straight quarterly profit in the first quarter, boosted by a 55 percent gain in orders. About 80 percent of the closings were ”spec” homes built in anticipation of customer orders, a strategy that paid off as buyers rushed to beat the tax deadline, President and Chief Executive Officer Donald R. Tomnitz said in a conference call with investors April 30. “We have continued to sell strong on these specs through the month of April,” he said. “If we see strong sales, we will probably put some more specs out there to meet that demand.”
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