WASHINGTON (Reuters) – Sales of new U.S. single-family homes surged in August and hit their highest level in more than six years, offering confirmation that the housing recovery remains on course.
The Commerce Department said on Wednesday sales jumped 18.0 percent to a seasonally adjusted annual rate of 504,000 units. That was the highest level since May 2008 and marked the second straight month of gains.
Economists polled by Reuters had forecast new home sales rising to only a 430,000-unit pace last month.
While the new home sales segment accounts for only 9.1 percent of the housing market, the increase last month should allay fears of renewed housing weakness after a surprise decline in home resales last month.
Existing home sales fell in August for the first-time in four months as investors, who have been supporting the market, stepped away. Some economists, however, think the departure of investors, who have been bidding up prices, is a positive development for housing.
A survey last week showed homebuilder sentiment hit its highest level in nearly nine years in September, with builders reporting a sharp pick-up in buyer traffic.
But housing continues to be hobbled by relatively high unemployment and sluggish wage growth.
In a separate report, the Mortgage Bankers Association said mortgage applications fell last week. The decline, however, followed a jump in the week ending Sept. 12.
U.S. financial markets were little moved by the data, but housing shares tumbled after home builder KB Home reported earnings that missed Wall Street’s expectations.
KB HOME shares fell 6.89 percent, while Pulte Group slipped 1.74 percent. Toll Brother dropped 1.27 percent.
In August, new home sales soared 50 percent in the West to their highest level since January 2008.
Sales in the populous South increased 7.8 percent to a 10-month high. In the Northeast, sales rose 29.2 percent, but were flat in the Midwest.
Despite the rise in sales, the stock of new houses on the market hit its highest level in four years, giving buyers more choice. At August’s sales pace it would take 4.8 months to clear the supply of houses on the market. That compared to 5.6 months in July.
Six months’ supply is normally considered a healthy balance between supply and demand. The median new house price increased 8.0 percent in the 12 months to August.