New home sales hit seven-month high; jobless claims rise

Fri Mar 24, 2017 11:01am EDT
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(In this March 23 story, Labor Department corrects data to show claims at 261,000 instead of 258,000. Also corrects other data in report)

By Lucia Mutikani

WASHINGTON (Reuters) - New U.S. single-family home sales jumped to a seven-month high in February, suggesting the housing market recovery was gaining momentum despite higher prices and rising mortgage rates.

Other data on Thursday showed an unexpected increase in the number of Americans filing for unemployment benefits last week. Still, the labor market continues to tighten, which together with the strength in housing, should underpin economic growth.

"New home sales are the secret sauce that helps make the economy grow," said Chris Rupkey, chief economist at MUFG Union Bank in New York. "This will put some backbone in investment spending and make this economic expansion more sustainable."

The Commerce Department said new home sales increased 6.1 percent to a seasonally adjusted annual rate of 592,000 units last month, the highest level since July 2016. Sales have now more than recouped the sharp drop suffered in December.

Economists had forecast new home sales, which account for about 9.7 percent of the overall market, rising 0.7 percent to a rate of 565,000 units in February. Sales were up 12.8 percent compared to a year ago, showing the housing market's resilience despite reduced affordability.

The 30-year fixed mortgage rate is around 4.30 percent. House prices increased 5.7 percent in January from a year ago, according a government report published on Wednesday.

Last month's new home sales were likely partially buoyed by unseasonably warm weather. Most economists see a limited impact on housing from higher mortgage rates because a tightening labor market is improving job opportunities for young adults.   Continued...

FILE PHOTO - A 'House For Sale' sign is seen outside a single family house in Uniondale, New York, U.S. on May 23, 2016.  REUTERS/Shannon Stapleton/File Photo