Markets Rally As Home Sales Rise Unexpectedly New-home sales rose 4.7 percent in February over the previous month, the Commerce Department reported; economists had been expecting a drop. Durable goods orders also rose.
NPR logo Markets Rally As Home Sales Rise Unexpectedly

Markets Rally As Home Sales Rise Unexpectedly

Stocks rose Wednesday after the government released reports showing new-home sales and durable goods orders both up unexpectedly last month.

The Commerce Department reported that new-home sales rose 4.7 percent in February to a seasonally adjusted annual rate of 337,000, from an upwardly revised January figure of 322,000 sales. January remains the worst month for new-home sales since the government started tracking the statistic in 1963.

Economists surveyed by Thomson Reuters had expected February sales to fall to a pace of 300,000 units.

In February, sales rose 9.7 percent in the South from a month earlier, and 6.6 percent in the West. They dropped 9.1 percent in the Midwest and 3.3 percent in the Northeast.

Pat Newport, a housing economist at IHS Global Insight, urged caution when looking at the figures. He said the latest reports are coming after steep, weather-related declines in January — and they're still the second-worst reports on record. New-home sales are down 40 percent from a year ago, and prices are down 18 percent.

"The housing numbers that are coming out, they were still horrible numbers," said Newport.

But with mortgage loans tight, the median sales price fell to $209,000 — down a record 18.1 percent in February from a year ago.

The inventory of homes available for sale in February was the smallest since June 2002, but there was still more than a year's supply of new homes on the market.

The news comes two days after a report that home resales in February also jumped. The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. That is the largest amount of growth in nearly six years.

The Commerce Department also said orders for durable goods — expensive items expected to last more than three years — rose 3.4 percent to $165.6 billion in February, the biggest increase since December 2007. The rise comes one month after a revised 7.3 percent plunge in durable goods order.

Stock exchanges reacted to the news. The Dow Jones industrial average was up 188 points, or 2.44 percent, by 10:45 a.m. Eastern time. The Standard & Poor's 500 index and the Nasdaq stock index also were sharply higher.

The uptick in durable goods orders was led by orders for military aircraft and parts, which shot up 32.4 percent. Demand for machinery, computers and fabricated metal products also rose. But although the new figures suggest some moderation in the economic downturn, some analysts believe the numbers aren't signaling an end to the recession.

Scott Brown, the chief economist at Raymond James & Associates, said orders are down 28 percent year over year, if January and February orders are taken together.

"A lot of this just appears to be reversing the bigger drop that we had in January. Machinery, for example, rose 13.5 percent after falling 10 percent in January. Primary metals remain weak," he said.

Civilian aircraft orders were down sharply in February, but aside from aircraft, orders for nondefense durable goods grew by more than 6 percent.

From NPR and wire reports