WASHINGTON (AP) — Buoyed by steady job gains and low mortgage rates, Americans purchased new homes in August at the fastest pace in more than seven years.
New-home sales surged 5.7 percent last month to a seasonally adjusted annual rate of 552,000, the Commerce Department said Thursday. That is the strongest pace since February 2008, near the beginning of the Great Recession. Last month's increase followed an even bigger 12 percent jump in July, according to the government's revised figures.
Healthy hiring and smaller price increases for new homes have finally begun pushing up sales, which were hammered during the Great Recession and recovered slowly even after the downturn ended in 2009. New-home sales have soared nearly 22 percent in the past year.
Sales figures for newly-built homes are notoriously volatile and typically revised heavily in subsequent months. But most economists were still encouraged by the gains.
"Housing has been an economic bright spot this year and activity in the new home construction market remains solid," said Michelle Girard, an economist at RBS Securities.
Surveys show that homebuilders' outlook is the most optimistic in a decade, a sign that construction could pick up. The supply of new homes has been scarce, so greater construction could result in more sales.
Strong gains in new-home sales and construction could accelerate the economy by generating construction jobs, demand for more building materials and more spending on landscaping and other services.
Home builders raised new-home prices aggressively last year, likely weighing on sales, which totaled just 414,000 in 2014. That was little changed from sales in 2013. But builders have reined in price increases this year, fueling more buyer traffic and purchases.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, says that new-home prices jumped 10.7 percent in the final three months of last year, compared with a year earlier. But they rose just 0.8 percent in the April-June quarter from a year ago, he said.
In August, the median price for a new home was $292,700, just $600 higher than the previous month. The median is the price where half of all home prices are higher and half are lower.
Federal Reserve Chair Janet Yellen said last week that she expects the housing market to keep improving as more people find jobs and younger Americans increasingly move out on their own.
"We are envisioning further improvement in the housing market," Yellen said. "It remains very depressed."
Right now, however, potential buyers are facing fewer choices than would normally be the case. There were just 216,000 new homes for sale at the end of August, enough to last 4.7 months at the current pace of sales. That's below the six months that is more common historically.
Still, low mortgage rates are keeping home purchases affordable for many would-be buyers. The rate for a 30-year fixed mortgage averaged just 3.9 percent nationwide last week, according to mortgage buyer Freddie Mac, far below historical norms.
This story has been corrected to reflect the correct definition of median.