Purchases of new homes unexpectedly rose in February to a seven-year high as stronger job gains helped bolster industry activity amid severe weather.
Sales climbed 7.8% to a 539,000 annualized pace, the most since February 2008, Commerce Department data showed Tuesday in Washington. The reading exceeded even the most optimistic forecast of economists surveyed by Bloomberg.
Americans withstood weaker income gains and higher property prices, braving a chillier-than-usual February to go out and buy a house last month. Further healing in the labor market and a boost in inventory should provide stronger support to an industry entering its busiest sales season.
"You have solid job growth, income growth is a little bit soft but still positive, still very low mortgage rates, gradually easing access to credit," Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh, said before the report. "I would expect we'd see further gains over the course of this year."
The median forecast of 76 economists surveyed by Bloomberg called for the pace to fall to 464,000. Estimates ranged from 400,000 to 490,000. The Commerce Department revised the January reading up to a 500,000 pace from a previously estimated 481,000.
The figures are based on a small sampling of builders which makes them subject to revisions. The report showed the confidence interval for last month's reading was plus or minus 15.2%. That means there was a 90% chance the change in sales in February was between a decline of 7.4% and a 23% advance.
The median sales price of a new house increased 2.6% from February 2014 to $275,500, today's report showed.
The strengthening in demand last month was led by a record 153% surge in the Northeast and a 10.1% gain in the South. Purchases fell in the Midwest and West.
The sales data ran counter to other figures that showed industry activity was inhibited by chillier-than-usual weather in parts of the country. Last month, the eastern seaboard saw below-normal temperatures from Atlanta to New York and record snowfalls in New England. The National Oceanic and Atmospheric Administration's data showed the snowiest month on record for Boston, while record-low temperatures for any February were reached in Chicago, Buffalo and Cleveland.
The supply of homes dropped to 4.7 months at the current sales pace, the lowest since June 2013, from 5.1 months in January. There were 210,000 new houses on the market at the end of February, the fewest since October.
New-home sales, which account for about 7% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Previously owned U.S. home purchases fell short of a 5 million annual rate in February for a second month, National Association of Realtors data showed Monday. Closings rose 1.2% to a 4.88 million annualized rate. A 7.5% increase in the median price compared with February 2014 was the fastest rise in a year as fewer homes were on the market.
Acceleration in property values is limiting participation among would-be home buyers, while a lack of inventory is giving Americans fewer properties from which to choose.
Sluggish income gains also are a restraint on purchases. Average hourly earnings rose 2% in February from the same time last year, less than projected and matching the increase on average since the expansion began in mid-2009.
Still-cheap borrowing costs and steady job gains are helping to offset the impediments to home-buying. The average 30-year, fixed-rate mortgage dropped to 3.78% in the week ended March 19, close to the 3.31% rate in November 2012 that was the lowest in data back to 1971, according to Freddie Mac data.
Employers added more jobs than forecast in February and the unemployment rate dropped to 5.5%, the lowest in almost seven years. The 295,000 gain last month was stronger than the 259,670 monthly average in 2014 that was the best labor-market performance since 1999.
Not all homebuilders are seeing weakness on the horizon. The Bloomberg homebuilders index climbed last week to its highest level since July after Los Angeles-based KB Home said orders for the three months through February rose 24% in volume and 25% in value from the year-earlier period. KB Home soared 8.4% to $15.26, its biggest one-day gain since January 2013.
"Initial indications of demand have been encouraging," KB Home Chief Executive Officer Jeffrey Mezger said Friday on a conference call with analysts. "Our increasing traffic is a strong indication that demand is on the rise."
