New U.S. single-family home sales unexpectedly rose in July, reaching their highest level in nearly nine years as demand increased broadly, brightening the housing market outlook.
The Commerce Department said on Tuesday new home sales surged 12.4 percent to a seasonally adjusted annual rate of 654,000 units last month, the highest level since October 2007.
June’s sales pace was revised down to 582,000 units from the previously reported 592,000 units. July’s increase, however, likely exaggerates housing market strength as it has not been matched by robust housing starts.
Still, sales were up 31.3 percent from a year ago. Economists polled by Reuters had forecast single-family home sales, which account for about 9.6 percent of overall home sales, slipping to a rate of 580,000 units last month.
Last months’ surprise increase pushed new home sales well above their second-quarter average, pointing to sustained momentum in the market for new homes. Residential construction was a minor drag on economic growth in the second quarter.
Housing market strength, marked by rising home values which are boosting household wealth, is helping to buoy consumer spending, cushioning the blow to the economy from a downturn in business spending as well as an inventory correction.
Tightening labor market conditions, which are steadily lifting wages, as well as mortgage rates near historic lows are supporting housing. Reports last week showed groundbreaking on single-family housing projects rising to a five-month high in July and sentiment among homebuilders increasing in August.
New home sales are likely benefiting from a chronic shortage of previously owned houses available for sale.
Robust demand for new homes is boosting homebuilders like Toll Brothers, which on Tuesday reported a rise in revenue for the fourth straight quarter. The luxury homebuilder said it had sold more houses at higher prices.