New-home sales shoot up 6.1%, hit­ting fastest pace since July

Austin American-Statesman - - MONEY & MARKETS -

Amer­i­cans re­sponded to higher mort­gage rates by snap­ping up new homes in Fe­bru­ary at the fastest pace since July.

New-home sales rose 6.1 per­cent month-over-month to a sea­son­ally ad­justed an­nual rate of 592,000, the Com­merce Depart­ment said Thurs­day. That sales pace is nearly 13 per­cent higher than Fe­bru­ary of last year, a pos­i­tive sign for the hous­ing mar­ket that de­mand is ro­bust at the start of the spring home-buy­ing sea­son.

Healthy job growth and a re­cov­er­ing econ­omy have pushed up in­ter­est in new homes, while the prospect of ris­ing mort­gage rates since the Novem­ber pres­i­den­tial elec­tion may have pulled some sales for­ward.

An ex­cep­tion­ally warm Fe­bru­ary also likely helped fuel sales.

“Sales were likely boosted by the much warmer-thanusual weather last month, which made vis­it­ing newhome con­struc­tion sites less mis­er­able than usual in Fe­bru­ary,” said Ian Shep­herd­son, chief econ­o­mist at Pan­theon Macro­eco­nomics.

Builders have ramped up the con­struc­tion of new homes, which helps meet strong de­mand and boosts sales. That could pro­vide a slight lift to the broader econ­omy through con­struc­tion jobs and the con­sumer spend­ing linked to home pur­chases.

But de­mand for homes is still out­pac­ing the con­struc­tion gains. There were 266,000 new homes for sale last month, the most since July 2009 — a month af­ter the re­ces­sion ended — and up nearly 10 per­cent from a year ear­lier.

The me­dian sales price in Fe­bru­ary of a new home was $296,200, a de­cline that might re­flect that much of the sales last month were in the cheaper South­ern mar­kets.

Con­struc­tion firms are bullish that sales will keep im­prov­ing, even though they re­main well be­low the heights of the hous­ing boom seen more than a decade ago.

The Na­tional As­so­ci­a­tion of Home Builders/ Wells Fargo builder sen­ti­ment in­dex climbed to 71 this month, the high­est read­ing since June 2005.

Some buy­ers may be look­ing to lock in their pur­chases out of con­cern that mort­gage rates will rise, pos­si­bly hurt­ing af­ford­abil­ity.

Mort­gage buyer Fred­die Mac said Thurs­day the av­er­age rate on 30-year, fixe­drate home loans this week was 4.23 per­cent. That rep­re­sents a slight de­cline from the prior week, but it’s sig­nif­i­cantly higher than the 3.65 per­cent av­er­age last year.

In the paper re­leased Thurs­day, Case and Deaton draw a clearer re­la­tion­ship be­tween ris­ing death rates and changes in the job mar­ket since the 1970s. They find that men with­out col­lege de­grees are less likely to re­ceive ris­ing in­comes over time, a trend “con­sis­tent with men moving to lower and lower skilled jobs.”

Other re­search has found that Amer­i­cans with only high school diplo­mas are less likely to get mar­ried or pur­chase a home and more likely to get di­vorced if they do marry.

“It’s not just their ca­reers that have gone down the tubes, but their mar­riage prospects, their abil­ity to raise chil­dren,” said Deaton, who won the No­bel prize in eco­nom­ics in 2015 for his long-stand­ing work on so­lu­tions to poverty. “That’s the kind of thing that can lead people to de­spair.”

It’s not en­tirely clear why these trends have af­fected whites much more than they have African-Amer­i­cans or His­pan­ics, whose death rates are im­prov­ing.

Case and Deaton note that many His­pan­ics are “markedly bet­ter off ” than par­ents or grand­par­ents who were born abroad, en­abling a greater sense of op­ti­mism. African-Amer­i­cans, they add, may have be­come more re­silient to eco­nomic chal­lenges given their long-stand­ing dis­ad­van­tages in the job mar­ket.

The data is clear, though: In 1999, the death rate for high school-ed­u­cated whites ages 50 through 54 was 30 per­cent lower than the death rate for all African-Amer­i­cans in that age group. By 2015, it was 30 per­cent higher.

The ed­u­ca­tional split is also grow­ing. Even while the death rate for whites with­out a col­lege de­gree is ris­ing, the rate for whites who are col­lege grad­u­ates is fall­ing, Case and Deaton found.

The trends cut across di­verse re­gions of the coun­try, the re­searchers found. While the worst-hit spots in­clude Ap­palachian states such as West Vir­ginia and Ken­tucky, they also in­clude such ar­eas as Maine, Bal­ti­more and eastern Wash­ing­ton state.

Amer­i­cans with less ed­u­ca­tion are also far­ing much worse when com­pared with adults in other coun­tries, Case and Deaton con­cluded. Death rates in Europe for people with limited ed­u­ca­tion are fall­ing — and in most coun­tries, they’re fall­ing faster than death rates for those with more ed­u­ca­tion.

For those rea­sons, Case and Deaton dis­pute the no­tion that govern­ment dis­abil­ity ben­e­fit pro­grams are re­spon­si­ble for some of these prob­lems by en­abling more Amer­i­cans to stop work­ing. So­cial wel­fare pro­grams in Europe are typ­i­cally more gen­er­ous yet haven’t caused a rise in death rates.

Given the long-run­ning na­ture of these trends, many of which stem from the 1970s, re­vers­ing them could take years, Case and Deaton write. But there are im­me­di­ate steps that could be taken, Deaton said. Rou­tine pre­scrip­tions for opi­oids should be cut back.

And, “Europe has a much bet­ter safety net than we do, and they’re not see­ing the same sort of prob­lems as we are,” he said.

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