Expansion flexes more muscle; Las Vegas home prices notch double-digit gain
WASHINGTON — Consumers and companies are starting to act as if the economic expansion is here to stay.
Purchases of new homes jumped in May to a five-year high, while business investment plans improved for a third straight month, figures from the Commerce Department showed Tuesday in Washington.
And a national home-price survey showed several cities, including Las Vegas, revealing annual gains of more than 20 percent.
The data point to the self-sustaining expansion the Federal Reserve is seeking to nurture as rising property values boost household wealth and spending, while businesses invest in new equipment to meet growing demand. Stocks climbed, with the Standard & Poor’s 500 index rebounding from a nine-week low, as the figures supported forecasts that the economy will overcome a midyear slump and accelerate in the second half of 2013.
“It’s all good news,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The economy is going to gain traction.”
Builders sold 476,000 new properties at an annualized rate last month, a 2.1 percent gain from April, the most since July 2008, the Commerce Department figures showed. The median selling price climbed to $263,900, up 10.3 percent from May 2012.
The median new-home price in Las Vegas was $254,550 in May, up 32 percent from a year earlier, Home Builders Research reported.
The median price for an existing single-family home was $170,000, up 32.8 percent year over year, the Greater Las Vegas Association of Realtors said this month.
Lennar Corp. is among builders seeing increased sales, orders and higher average purchase prices. The third-largest U.S. homebuilder by revenue on Tuesday reported second-quarter earnings that beat analysts’ estimates.
Miami-based Lennar delivered 4,464 houses, compared with 3,222 houses a year earlier, while the average sales price increased to $283,000 from $250,000. Orders rose 27 percent.
“Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second-quarter results together with real-time feedback from our field associates continue to point towards a solid housing recovery,” Lennar CEO Stuart Miller said in a statement.
Values of existing properties also are accelerating. Home prices in 20 U.S. cities rose 12.1 percent in April from the same month last year, the biggest year-over-year gain since March 2006, a report from S&P/Case-Shiller showed.
Prices rose from a year earlier in all 20 cities for the fourth straight month.
Twelve cities posted double-digit gains. Besides Las Vegas, San Francisco, Phoenix and Atlanta all had price increases over the past year of more than 20 percent, while Detroit and Los Angeles showed gains of nearly that much. Minneapolis posted a 15 percent gain.
The demand for housing is driving residential construction and aiding the economic expansion.
Consumers who long held off on purchases are entering the market even as borrowing costs rise, encouraged by the increases in property values and gains in employment.
“The housing recovery is alive and well and has a long way to go, and higher rates aren’t going to choke it off,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who projected a gain to 475,000. “It’s given the economy, or will give the economy, a lot of oomph.”
Americans are gaining confidence as their biggest asset, a house, becomes more valuable. The New York-based Conference Board’s consumer sentiment index increased to 81.4 in June from 74.3 a month earlier, data from the private research group showed.
Houses aren’t the only thing consumers are more willing to buy as prospects improve.
Cars and light trucks sold at a 15.2 million annualized rate in May, putting 2013 on course to be the best year for automakers since 2007, industry figures show.
The gains in spending, which account for 70 percent of the economy, are helping to bolster the expansion after government budget cuts took effect in March.
“Unambiguously, the economy is showing signs of improvement despite sizable fiscal drag,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.
He said the positives include the improving labor market, and a general rise in wealth in general, at least up until the past week.
The Associated Press and Las Vegas Review-Journal writer Jennifer Robison contributed to this report.