WASHINGTON (AP) — Americans snapped up new homes in June at the fastest pace in five years, a sign the housing recovery is strengthening.
Sales of newly built homes rose 8.3 percent last month to a seasonally adjusted annual rate of 497,000, the Commerce Department said Wednesday. That's the highest since May 2008 and up from an annual rate of 459,000 in May, which was revised lower.
While sales are still below the 700,000 pace consistent with healthy markets, they have risen 38 percent in the past 12 months. That's the biggest annual gain since January 1992.
"There's an awful lot of headroom for more gains in new-home sales once the job market recovers more fully," Jonathan Basile, an economist at Credit Suisse, said in a note to clients.
Home sales and prices have climbed since early last year, buoyed by solid hiring and low mortgage rates. Housing has helped drive economic growth this year at a time when other parts of the economy have languished, such as manufacturing and business investment.
New-home sales make up only a small part of the market. But they have an outsize impact on the economy. Each home built creates an average of three new jobs and generates about $90,000 in tax revenue, according to data from the National Association of Home Builders.
One concern is that rising mortgage rates could slow sales in the coming months. The average rate on the 30-year fixed was 4.37 percent last week — a full percentage point higher than in early May. At the same time, mortgage applications to purchase homes have fallen in the past few weeks.
Rates surged after Chairman Ben Bernanke said the Federal Reserve could slow its bond-buying program later this year if the economy continues to improve. The Fed's bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.
Economists noted that new-home sales reflect contract signings, rather than completed purchases, and don't necessarily include completed mortgage applications. As a result, last month's increase could reflect efforts by some purchasers to buy homes before rates rise further.
"The U.S. housing market appears to be shrugging off the recent jump in mortgage rates," said Sal Guatieri, an economist at BMO Capital Markets.
Rising demand and a tight supply of available homes for sale have pushed up prices. The median price of a new home in June was $249,700, up 7.4 percent from a year ago.
The number of new homes available for sale at the end of June was 161,000. That's only slightly higher than May's level and 11 percent above year-ago levels. At the current sales pace, it would take only 3.9 months to exhaust the supply of new homes on the market — matching a nine-year low. A supply of six months is typical in healthy markets.
Limited homes on the market have kept sales from rising even faster. Still, higher prices, growing sales and the tight supply have made builders more optimistic about their prospects. That's led many to ramp up construction and add jobs.
Builder confidence rose in July to the highest level in seven years, according to a NAHB survey. And customer traffic and builders' outlook for single-family home sales over the next six months are at the highest levels since the housing bubble burst in 2006.