New U.S. single-family home sales rose more than expected in April and the median price surged, suggesting the housing market recovery was gaining traction.
The Commerce Department said on Tuesday sales increased 6.8 percent to a seasonally adjusted annual rate of 517,000 units. March’s sales pace was revised up to 484,000 units from the previously reported 481,000 units.
Economists polled by Reuters had forecast new home sales, which account for 9.3 percent of the market, rising to a 510,000-unit pace last month.
The upbeat report added to housing starts data in indicating that housing was gaining momentum after treading water for much of last year. Economists believe housing will take the baton from a lethargic manufacturing sector and help to drive economic growth this year.
Housing is being buoyed by a strengthening jobs market, which is encouraging young adults to set up their own households.
New homes sales jumped 36.8 percent in the Midwest to a seven-year high and increased 5.8 percent in the South. Sales fell 5.6 percent in the Northeast and slipped 2.3 percent in the West.
The stock of new houses available on the market rose 0.5 percent last month to 205,000. Supply still remains less than half of what it was at the height of the housing boom, good news for home builders who will need to ramp up construction.
At April sales pace it would take 4.8 months to clear the supply of houses on the market, down from 5.1 months in March.
With supply still tight, the median price for a new home rose 8.3 percent from a year ago to $297,300. While higher home prices could reduce affordability, they boost household equity, which could boost consumer spending.