* New home sales slip 0.3 percent, but stay near 2-yr highs
* Median new home price rises record 11.2 percent on month
* Median new home price highest in more than five years
By Lucia Mutikani
WASHINGTON, Sept 26 (Reuters) – New U.S. home sales held
near two-year highs in August and prices vaulted to their
highest level in more than five years, adding to signs of a
broadening housing market recovery.
The Commerce Department said on Wednesday sales slipped 0.3
percent to a seasonally adjusted 373,000-unit annual rate, but
the decrease was from an upwardly revised 374,000-unit July pace
that was the fastest since April 2010.
From a year ago, sales were up 27.7 percent last month.
At the same time, the median price of a new home increased a
record 11.2 percent in August to $256,900 — the highest level
since March 2007. Compared to August last year, the median sales
price jumped 17 percent, the largest rise since December 2004.
The report was in keeping with other data that have
suggested a turn-around in the housing market, which collapsed
in 2006, igniting the 2007-09 recession.
Home resales surged last month, homebuilder sentiment jumped
to a six-year high in September and home prices in 20 major
metropolitan areas rose in July for a sixth straight month,
recent reports have shown.
Still, the housing market lacks sufficient strength to take
the baton from the faltering manufacturing sector as the main
driver of the U.S. economic recovery.
“There are increased signs that the housing recovery is now
on a more sustainable path, though its impact on overall
economic activity will remain relatively modest at best over the
near-term,” said Millan Mulraine, a senior economist at TD
Securities in New York.
U.S. financial markets were little moved by the data amid
worries Spain’s reluctance to ask for a full-blown bailout would
prolong Europe’s debt crisis. However, an index of
housing-related stocks fell as the pace of home sales was not as
strong as expected.
MISSING PISTON
The Federal Reserve targeted housing this month as a channel
to spur faster economic growth.
Fed Chairman Ben Bernanke said housing was the “missing
piston” in the recovery and the central bank announced it would
buy $40 billion in mortgage-backed securities per month until
the outlook for employment improved significantly.
Those measures have pushed mortgage rates to record lows,
and led to a rebound in demand for loans to purchase homes last
week, a second report showed. Fixed 30-year mortgage rates hit
an all-time average low of 3.63 percent last week.
Home building is expected to add to gross domestic product
growth this year for the first time since 2005.
Home builder Lennar Corp on Monday reported a 44
percent jump in orders for new homes during the third quarter,
the sixth straight quarter of growth.
While residential construction accounts for only about 2.5
percent of GDP, economists estimate that for every new house
built, at least three new jobs are created.
In addition, economists said rising home values could
support consumer spending.
“The turn in home prices is important, not only because the
housing industry is an important employer, but also the wealth
effect created by rising home prices can lift consumer spending
on other big-ticket items,” said Steven Ricchiuto, chief
economist at Mizuho Securities in New York.
The housing recovery is being driven by dwindling supplies
of homes on the market, especially distressed properties that
tend to sell well below their cost of construction.
Home builders are also keeping inventories lean.
The inventory of new homes on the market held near record
lows last month. At August’s sales pace it would take 4.5 months
to clear the houses on the market, unchanged from July.
“For years after the collapse in housing, home builders have
kept very lean inventories of new homes so any marginal pickup
in sales activity leads to a notable pickup in building,” said
Ellen Zentner, a senior economist at Nomura Securities
International in New York.
New home sales were up in three of the four regions, surging
20 percent to a near two-year high in the Northeast. Sales in
the South fell 4.9 percent.
