U.S Economy: Home Sales Surge!

April 23 (Bloomberg) -- Sales of new homes surged 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy sped up heading into the second quarter.

The gain in new-home sales was the biggest in 47 years as buyers rushed to qualify for a government tax credit and the weather improved, a Commerce Department report showed. Bookings for goods meant to last at least three years, excluding cars and aircraft, climbed 2.8 percent.

Stocks rose and Treasuries slid as the reports pointed to pickups in housing, business investment and exports that may benefit companies from builders such as Pulte Group Inc. to makers of capital goods including Eaton Corp. The outlook for the rest of the year hinges on job gains that will spur consumer spending, which makes up 70 percent of the economy.

“The pieces are falling into place for a strong recovery,” said Gus Faucher, director of macroeconomics at Moody’s Economy.com in West Chester, Pennsylvania. “We’ve got strong business investment and we’re going to have some investment in residential” real estate.

Stocks advanced, extending the Dow Jones Industrial Average’s longest weekly winning streak in six years. The Dow climbed 0.6 percent to 11,204.28 at the 4 p.m. close in New York, completing an eighth straight weekly gain. The 10-year Treasury note fell, pushing up the yield to 3.81 percent from 3.77 percent late yesterday.

Sales of new houses increased to an annual pace of 411,000, exceeding the highest forecast of economists surveyed by Bloomberg News. Last month’s purchase rate was the highest since July and followed a record-low 324,000 in February that was higher than previously estimated.

Exceeds Forecasts

Economists forecast purchases would rise to a 325,000 annual rate in March, according to the median estimate of 77 economists surveyed. Projections ranged from 300,000 to 362,000.

Demand may remain elevated through this month as Americans take advantage of a tax credit worth as much as $8,000 before it ends at the end of next week.

“We’ll probably see another jump in April and then we’ll get some payback in May and June,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Through the volatility, the trend in home sales is probably more up than down.”

Builder shares rallied, led by Pulte of Bloomfield Hills, Michigan, Miami-based Lennar Corp. and Standard Pacific Corp., which is based in Irvine, California.

Broad-based Gain

Sales increased in all four U.S. regions last month, led by a 44 percent jump in the South. The median price of a new home increased 4.3 percent in March from a year earlier to $214,000.

The Obama administration extended an incentive for first- time homebuyers in November and expanded it to include some current owners. The deadline for signing contracts is the end of this month, and the transactions must be completed by June 30.

Sales of previously owned homes, which account for about 90 percent of the housing market, are tabulated at contract closings, meaning demand may remain elevated through June. Purchases of new houses reflect contract signings, indicating the credit’s maximum influence on that market will be seen through April.

A report yesterday from the National Association of Realtors showed sales of existing homes jumped to a 5.35 million rate in March, the first increase in four months.

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