New U.S. single-family home sales recorded their biggest gain in 24 years in April, touching a more than eight-year high as purchases increased broadly, a sign of growing confidence in the economy’s prospects.
Tuesday’s report from the Commerce Department, which also showed a surge in new home prices to a record high, offered further evidence of a pick-up in economic growth that could allow the Federal Reserve to raise interest rates soon.
“Consumers are taking the leap and buying the biggest of big ticket items of their lives and this speaks to confidence. The Federal Reserve can raise rates at their June meeting without fear the economy is going to slow,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
New home sales jumped 16.6 percent 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.
Data for February and March were revised to show 39,000 more units sold than previously reported. Economists had forecast new home sales, which account for about 10.2 percent of the housing market, rising to only a 523,000 unit-rate last month.
New home sales increased broadly, with the exception of the Midwest. April’s increase, however, probably exaggerates the housing market strength given that homebuilders confidence has stagnated since rising in January.
New home sales are extremely volatile month-to-month and preliminary figures are subject to large revisions because they are mostly drawn from building permits data. Still, last month’s gain pushed new home sales well above their first-quarter average of 531,667 units.
The new home sales 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 slowed to a 0.5 percent annualized rate in the first quarter.
Minutes from the Fed’s April 26-27 policy meeting, published last week, 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.