New U.S. single-family home sales surged to a more than eight-year high in April and prices hit a record high, offering further evidence of a pick-up in economic growth that could allow the Federal Reserve to raises interest rates soon.
The Commerce Department said on Tuesday new home sales jumped 16.6% to a seasonally adjusted annual rate of 619,000 units, the highest level since January 2008. The percent increase was the largest since January 1992.
March’s sales pace was revised up to 531,000 units from the previously reported 511,000 units. Economists had forecast new home sales, which account for about 10.2% of the housing market, rising to only a 523,000 unit-rate last month.
New home sales are volatile month-to-month and April’s increase probably exaggerates the housing market strength.
Still, last month’s gain pushed new home sales well above their first-quarter average of 531,667 units. New home sales increased in three regions, but fell in the Midwest.
The report came in the wake of fairly upbeat data on home resales and residential construction. It also added to retail sales and industrial production reports in suggesting that the economy was gathering speed after growth almost stalled in the first quarter.
Minutes from the Fed’s April 26-27 policy meeting, published on Wednesday, showed most officials considered it appropriate to raise rates in June if data continued to point to an improvement in second-quarter growth. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.
The dollar rose to session highs against the euro and the yen after the new home sales report, while prices for U.S. government debt extended losses. The PHLX housing sector index hit a one-month high.
The housing market is being underpinned by a tightening labor market, which is starting to lift wages, a well as still very low mortgage rates. But a shortage of properties available for sale remains a hurdle and house prices have risen faster than wages, sidelining some first-time buyers.
Last month, the inventory of new homes on the market fell 0.4% to 243,000. At April’s sales pace it would take 4.7 months to clear the supply of houses on the market, down from 5.5 months in March.
With supply tight, the median price for a new home increased 9.7% from a year ago to a record $321,100.
New single-family homes sales soared 15.8% in the populous South to the highest level since December 2007. In the Northeast, sales jumped 52.8% to their highest level since October 2007.
Sales in the West, which have been volatile in recent months, rose 18.8% after plunging 15.2% in March. The West has seen a sharp increase in home prices amid tight inventories. Single-family homes sales fell 4.8% in the Midwest.