US home resales unexpectedly rose last month, reaching a six-month high, in the latest sign that the economy remains on firmer ground, despite slowing international growth and tightening financial market conditions.
The housing market strength was echoed by other data on Tuesday showing a solid rise in house prices in the year to December last year. However, the economic outlook was tempered by a fall in consumer confidence this month amid a stock market rout.
“The housing recovery continues, but the sharp drop in consumer confidence could be a sign that consumers are becoming anxious about their economic plight as the fallout from global growth concerns filters through to Main Street,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
The National Association of Realtors said existing home sales increased 0.4 percent to an annual rate of 5.47 million units, the highest level since July last year. Last month’s sales pace was also the second-highest since 2007.
Sales rose strongly in the US northeast, despite a massive snowstorm late last month, and were also up in the mid-west. They were unchanged in the south and fell 4.1 percent in the west, likely reflecting tight inventories and hefty home price gains.
Economists had forecast home resales decreasing 2.9 percent to a pace of 5.32 million units last month. Existing home sales were up 11 percent from a year earlier, the largest year-on-year gain since July 2013.
A separate report showed the S&P/Case Shiller composite index of 20 metropolitan areas rose 5.7 percent in Decemberlast year on a year-over-year basis, with some of the largest gains coming from cities in the west. Prices rose 0.8 percent in December from the month before on a seasonally adjusted basis.
“These are solid growth numbers that continue to tell a story of a very healthy market coming into the important spring season. Not too hot, not too cold, just right,” said Stephen Phillips, president at Berkshire Hathaway HomeServices in Irvine, California.
The housing reports added to retail sales, industrial production and employment data in suggesting the economy regained some momentum after slowing to a crawl in the fourth quarter.
Economists raised their first-quarter GDP estimates by at least one-tenth of a percentage point to as high as a 2.4 percent annual pace after the existing home sales data. The economy grew at a 0.7 percent rate in the fourth quarter.
Worries of a recession and relentless declines in oil prices triggered the recent wave of selling on international equity markets, causing financial market conditions to tighten.
The sell-off hurt consumer sentiment this month, a third report showed. The Conference Board said its consumer confidence index fell to a six-month low of 92.2 from a reading of 97.8 last month.
Households’ short-term outlook grew more pessimistic this month, with consumers apprehensive about business conditions, their personal financial situation and, to a lesser degree, labor market prospects, the Conference Board said.
US financial markets were little moved by the mixed data as investors focused on renewed weakness in oil prices. Stocks on Wall Street fell on Tuesday, but shares in Toll Brothers Inc, the largest US luxury homebuilder, jumped 3.6 percent after it reported a surge in quarterly revenue.
The US dollar was largely unchanged against a basket of currencies, while prices for US Treasury debt were trading higher.
Housing continues to be supported by a tightening labor market, which is starting to push up wage growth, boosting household formation. First-time buyers accounted for 32 percent of existing home sales last month, an increase from 28 percent in January last year.
Though residential construction only accounts for a small share of GDP, housing has a broader reach in the economy, which should help to sustain growth.
However, a lack of properties available for sale remains a challenge. The number of unsold homes on the market rose 3.4 percent to 1.82 million units last month from December last year, but was down 2.2 percent from a year earlier.
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