Strong US home sales, low layoffs highlight economy’s strength

WASHINGTON: US home resales hit their highest level in nearly 9- years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy’s strength.

Although another report on Thursday showed factory activity in the mid-Atlantic region contracted this month, a surge in new orders and shipments suggested the setback was likely temporary.

“The economy is doing well and is weathering the global turbulence. With housing and consumers powering ahead, some of the clouds are dissipating and summer looks good from a data point of view,” said Thomas Costerg, a US economist at Standard Chartered Bank in New York.

The National Association of Realtors said existing home sales increased 1.1 per cent to an annual rate of 5.57 million units last month, the highest level since February 2007.

It was the fourth straight month of increases and left sales 3 per cent higher than a year ago. Economists polled by Reuters had forecast sales slipping to a 5.48 million-unit pace in June.

Sales were boosted by first-time buyers, whose share of transactions rose to 33 per cent in June, the highest since July 2012. That compared to 30 per cent in May and a year ago. The increase in first-time buyers, whose participation is considered crucial for a strong housing market, came as US mortgage rates hit their lowest levels since 2013 on bets the Federal Reserve would be cautious about raising interest rates.

Britain’s vote on June 23 to leave the European Union has also put downward pressure on borrowing costs for home buyers as investors pile into safe-haven US government debt.

The housing market is being supported by a strengthening labour market, but sales remain constrained by a persistent shortage of properties available for sale, which is keeping home prices elevated. There were 2.12 million previously owned homes on the market last month, down 0.9 per cent from June.

The median price for a previously owned house rose 4.8 per cent from a year ago to a record $247,700 in June.

“We expect this buoyant performance to continue during the second half of this year, underpinned by strong employment growth, low mortgage rates and continued confidence in the economic recovery,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

The broader PHLX housing index, including builders, building products and mortgage companies, was down 0.14 per cent, tracking a slightly weak US stocks market.

The dollar was little changed against a basket of currencies, after the European Central Bank gave no hint that it was set on easing policy further in September to support growth. Prices for US government bonds fell.

In a separate report, the Labour Department said initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 253,000 for the week ended July 16, the lowest reading since April. Claims are near the 43-year low of 248,000 touched in mid-April. Economists had forecast initial claims rising to 265,000 in the latest week. Claims have now been below 300,000, a threshold associated with a healthy labour market, for 72 straight weeks, the longest stretch since 1973.

* Existing home sales increase 1.1 per cent in June * Weekly jobless claims fall 1,000 * Four-week average of claims decreases 1,250 * Mid-Atlantic factory activity contracts, but orders surge