New US single-family home sales rose less than expected in January, likely hurt by flooding in California, but continued to point to a strengthening housing market despite higher prices and mortgage rates. Other data on Friday showed a dip in consumer sentiment this month, though it remained at a level consistent with a healthy pace of consumer spending.
The Commerce Department said new home sales increased 3.7 percent to a seasonally adjusted annual rate of 555,000 units last month. Economists had forecast single-family home sales, which account for about 9 percent of overall home sales, surging 6.3 percent to a 570,000-unit rate last month.
New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions. Sales were up 5.5 percent compared to January 2016.
Data this week showed sales of previously owned homes jumped 3.3 percent in January to a 10-year high. House prices increased 6.2 percent in December from a year ago.
In a separate report on Friday, the University of Michigan said its consumer sentiment index fell to a reading of 96.3 this month from 98.5 in January. The index had surged in the prior three months following Donald Trump's victory in the November 8 presidential election. The University of Michigan said February's consumer sentiment reading suggested a 2.7 percent annualised growth pace in consumer spending this year.
The PHLX housing index was down 0.5 percent. The housing market strength comes even as the 30-year fixed mortgage rate has risen above 4.0 percent, outpacing annual wage growth that has been stuck below 3 percent. The gains in housing are being driven by a strong labour market which is near full employment. While the tightening labour market has not unleashed a stronger pace of wage growth, it has improved employment opportunities for young Americans, encouraging them to form their own households. But a shortage of properties available for sale remains an obstacle to a robust housing market.
Last month, new single-family homes sales soared 15.8 percent in the Northeast to their highest level since January 2008. They rose 14.8 percent in the Midwest and advanced 4.3 percent in the South. Sales in the West, which has been hit by unusually wet weather, fell 4.4 percent. The inventory of new homes on the market increased 3.5 percent to 265,000 units last month. New housing stock remains less than half of what it was at its peak during the housing boom in 2006.
At January's sales pace it would take 5.7 months to clear the supply of houses on the market, which was unchanged from December. A six-month supply is viewed as a healthy balance between supply and demand. The median price for a new home increased 7.5 percent to $312,900 in January from a year ago.
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