U.S. Economy: New Home Sales, Durables Orders Rose in February
March 24 (Bloomberg) -- U.S. new home sales rose by the most in four years and prices jumped to a record in February as buyers raced to beat rising mortgage rates. Orders for big-ticket goods also increased during the month.
Sales rose 9.4 percent to 1.226 million new houses at an annual rate and the median price increased 9.6 percent to $230,700, the Commerce Department said today in Washington. Durable goods orders increased 0.3 percent, the third increase in four months, aided by a rebound in aircraft, the department said.
Initial jobless claims unexpectedly rose 3,000 to 324,000 last week, while remaining at a level that suggests the world's largest economy added jobs this month, the Labor Department said. Today's reports reinforce the Federal Reserve's statement this week that output is growing at a solid pace while labor markets strengthen ``gradually,'' economists said.
``The economy is improving, job growth is improving, and we continue to see a strong housing market,'' said Bob Walters, chief economist at Quicken Loans, in an interview. Livonia, Michigan- based Quicken offers residential mortgages and home-equity loans through its Web site.
Economists predicted sales would reach a 1.15 million annual rate in February after January's previously reported pace of 1.106 million, according to the median of 64 estimates in a Bloomberg News survey of economists.
The Fed this week raised its benchmark interest rate for a seventh straight time. Thirty-year fixed mortgage rates rose to 6.01 percent last week, the highest since last week in July, Freddie Mac, the No. 2 buyer of mortgages, said today. The low was 5.21 percent in June 2003.
`Last-Chance Sale'
``Thirty-year mortgage rates have been slow to rise, but they're making up for it now,'' said Paul Brewbaker, chief economist at the Bank of Hawaii. ``That's where this `last-chance sale ends tomorrow' mentality among buyers is coming from.''
U.S. 10-year Treasuries headed for their third weekly decline in four today on concern about faster inflation. The 4 percent note maturing in February 2015 was little changed at 95 13/32 to yield 4.58 percent as of 10:25 a.m. in New York. The yield is up from 3.99 percent on Feb. 9.
``From Alan Greenspan on down, everyone is running an advertisement for the homebuilding industry that says prices are going up, so you better buy now,'' said Robert Toll, chief executive of Toll Brothers Inc., the largest U.S. builder of luxury homes, in an interview.
Durable Goods
The increase in durable goods orders followed a 1.1 percent decline in January, the Commerce Department said. Orders excluding transportation fell 0.2 percent, the first drop in three months, after a 0.9 percent gain in January that was bigger than previously reported, the Commerce Department said.
The drop in February's orders excluding transportation may be a belated response to the end of tax incentives designed to spur orders in 2004, economists said.
``We were due for a pause,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. ``These figures are certainly not a cause for concern.''
The median forecast of 73 economists Bloomberg News surveyed before the report called for orders to rise 0.9 percent after a previously reported decline of 1.3 percent for January. Orders excluding transportation were expected to rise 0.3 percent.
Because of revisions in January, the dollar value of orders was close to expectations of $202.2 billion for all durable goods and $147.5 billion for durables excluding transportation.
Hiring Outlook
The U.S. economy created 262,000 jobs in February, the most in four months. Employers probably added another 225,000 workers in March, according to the median estimate in a Bloomberg survey of economists before the government's April 1 report.
``Companies are generally becoming more confident despite the increase in energy costs and interest rates,'' said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis. ``Sales and orders remain strong and companies are even experiencing some increase in pricing power. All this is leading to increased hiring and a general easing in layoffs.''
The less-volatile four-week moving average was 321,750, down 5.4 percent from a year ago, according to today's Labor Department report. Last week's claims were expected to decline to 315,000 from an initially reported 318,000 earlier, according to the median estimate in a Bloomberg survey.
Aircraft Orders
Today's durable goods report was aided by an increase in aircraft orders. Orders for transportation equipment, a volatile category, rose 1.6 percent after falling 6.3 percent in January. Bookings for commercial aircraft rose 32 percent, after decreasing by the same percentage in January.
Chicago-based Boeing Co., the world's second biggest maker of airplanes, behind Europe's Airbus SAS, said March 8 it received orders for 34 aircraft in February, up from 20 the previous month.
Bookings for non-defense capital goods excluding aircraft, an indication of future business investment, fell 2.1 percent last month after rising 4.4 percent in January, a bigger increase than previously reported. Shipments of such goods, which the government uses to calculate quarterly gross domestic product, fell 2.6 percent after rising 3.6 percent.
Even with the declines in February, orders for non-defense capital goods excluding aircraft were up 16 percent in the first two months of 2005 compared with a year earlier.
Bookings for motor vehicles and parts fell 1.2 percent after falling 4.5 percent in January.
Inventories relative to sales, a measure of how long supply can be expected to last at the current level of demand, stayed at a record low 1.3 months in January.
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