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 The recovery, however, will likely remain gradual against a
backdrop of relatively high unemployment and sluggish wage growth,
which are sidelining first-time buyers and keeping many young adults
from seeking their own accommodation.
"This is welcome news in an otherwise mixed outlook," said Diane
Swonk, chief economist at Mesirow Financial in Chicago. "We are
still a long way from the housing market recovering from the bust."
New home sales jumped 18.0 percent to a seasonally adjusted annual
rate of 504,000 units, a second straight monthly gain that took them
to the highest level since May 2008, the Commerce Department said on
Wednesday.
Though new home sales account for only about 9 percent of the
market, the increase helped allay fears of renewed weakness after a
surprise decline in home resales last month.
"We expect some of this buoyancy to be reversed in the coming month,
but continue to believe that the underlying fundamentals of the
housing sector remain favorable," said Millan Mulraine, deputy chief
economist at TD Securities in New York.
U.S. financial markets were little moved by the data, but housing
shares tumbled after home builder KB Home <KBH.N> reported earnings
that missed Wall Street's expectations.
KB Home shares fell 5.7 percent, while Pulte Group <PHM.N> slipped
0.6 percent and Toll Brothers <TOL.N> dropped 0.9 percent. The
overall housing market index <.HGX>, however, was up marginally in
mid-afternoon, tracking broader indexes.
CHALLENGING ENVIRONMENT
The National Association of Realtors said on Monday that sales of
previously owned homes fell in August for the first time in four
months as the investors who had been supporting the market stepped
away.
Economists hope their departure will leave an opening for first-time
buyers, but worry still-high unemployment and sluggish wage growth
will continue to constrain sales.
The share of first-time buyers in the home resale market has been
stuck around 29 percent, well below the 40 percent to 45 percent
considered as ideal by economists and real estate agents.
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"It's still a challenging environment for those buyers," said Guy
Berger, an economist at RBS in Stamford, Connecticut. "You can make
a good case for a slow, gradual improvement."
In a separate report, the Mortgage Bankers Association said
applications for loans to purchase homes fell last week as mortgage
rates crept up. New loan applications are well off peaks seen early
last year.
With average hourly earnings up only 2.1 percent over the past year,
many Americans are opting to rent, while some of those who have
recently graduated from college are moving back home or staying with
friends, weighing on home sales.
According to government data released last week, 492,000 households
were formed last year, well below the one million economists say
would be consistent with a healthy market.
"Household formation, a major driver of new construction, is falling
asleep at the wheel," said Patrick Newport, an economist at IHS
Global Insight in Lexington, Massachusetts.
Despite the rise in sales in August, the stock of new houses on the
market hit its highest level in four years, giving buyers more
choices.
At August's sales pace it would take 4.8 months to clear the supply
of houses on the market, down from 5.6 months in July. A six months'
supply is normally considered a healthy balance between supply and
demand.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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