New U. S. single-family home sales in September reached their highest level in almost two-and-a-half years, a sign the housing recovery is gaining steam.
Sales jumped 5.7 percent to a seasonally adjusted 389,000 annual rate, the Commerce Department said. That’s the highest level since April 2010, when sales were aided by a tax credit for first-time home buyers.
August’s sales rate was revised down to a 368,000-unit pace from the previously reported 373,000 units, but the tone of the report was encouraging—the median price of a new home rose 11.7 percent from a year ago.
September’s sales rate topped analyst predictions; economists polled by Reuters had forecast new home sales rising to a 385,000-unit pace. Compared with September 2011, new home sales were up 27.1 percent.
The increase in sales last month contributed to signs of a broadening housing market recovery, but new home sales are just more than a quarter of their peak in July 2005. The market is still working its way back after imploding in 2006 and dragging the economy through its worst depression since the 1930s.
Though increasing home sales are giving a modest lift to house prices and to builders’ confidence to take on new projects, the housing market rebound lacks the vitality needed to become the main driver of an economic revival.
The housing market recovery is being boosted by record-low mortgage rates, which have been purposely held down by the Federal Reserve. The U.S. central bank has targeted housing as a way to spur growth and intends to buy $40 billion in mortgage-backed securities per month until the employment outlook improves significantly.
The inventory of new homes on the market rose 1.4 percent in September but remained near record lows. It would take 4.5 months to clear the houses on the market at September’s sales pace, the lowest since October 2005, and down from 4.7 months in August.
New home sales last month were up in three of the four U.S. regions—they tumbled 37.3 in the Midwest.