U.S. Homebuilders Defy Expectations With Gain in New-Home Sales

(Bloomberg) -- Last decade, housing crashed the U.S. economy. But in the 2020 pandemic, it could be one of the bright spots.

New home sales unexpectedly climbed 0.6% in April to a 623,000 annualized pace, government data showed Tuesday. That was 30% higher than the median forecast in a Bloomberg Survey of economists of 480,000. The news sent the shares of homebuilders surging, with an index that tracks the industry hitting the highest level since March 9.

That’s not to say that housing is booming, it’s just performing better than some very low expectations. Mortgage rates near historic lows may be putting a floor under the housing market and construction -- in most of the country -- has been deemed essential so builders have been able to power through.

Job losses, meanwhile, are primarily hitting renters who are more likely to be working in lower-paying service and hospitality jobs that were damaged most by social-distancing rules.

“If the reopenings continue, housing may provide an upside surprise to the economy this year,” Mark Vitner, senior economist at Wells Fargo.

Homebuilder ETF Soars to Pre-Crisis Level on Sales Surprise

Unlike the existing home market, which has seen a big drop in inventory as sellers pull back, builders are accommodating buyers, Vitner said. They’re showing floor plans virtually and even offering drive-thru closings.

The stocks of homebuilders have rebounded in recent weeks, beating the gain in the S&P 500 since the start of May.

The builders have a long way to go before they’re back at pre-pandemic levels. While sales were up slightly on a seasonally-adjusted basis, they were down 6.2% from a year earlier. And the median sale price fell 8.6% from a year earlier to $309,900.

Still, three of four U.S. regions showed stronger home sales in April than a month earlier, reflecting 2.4% gains in the South and Midwest, the Commerce Department’s report showed. Purchases climbed 8.7% in the Northeast and dropped 6.3% in the West.

The government’s data measure signed contracts to buy homes. The slight gain in April came after sales dropped the most since 2013 in March, when much of the U.S. economy shut down to stem the spread of coronavirus.

©2020 Bloomberg L.P.