Durable Goods Orders, Home Sales Surge
New home sales rose in July for the fourth month in a row, and orders for durable goods soared at the fastest pace in two years, giving U.S. consumers a double dose of good economic news and bolstering evidence that the devastating recession is abating.
In one of two reports released Wednesday, the Commerce Department reported that sales of new homes rose 9.6 percent to an annual pace of 433,000 — the biggest monthly gain since February 2005. But the median home price fell to $210,100 from $237,300 for the same period last year.
The combination of lower prices and low mortgage rates had buyers out in force last month, reducing a backlog of homes that have been for sale. The number of houses on the market dropped to 271,000 at the end of the month, as prospective homeowners hurried to take advantage of an Obama administration program that gives tax breaks to first-time buyers. The program gives qualified buyers tax breaks of up to $8,000 if they purchase a primary residence before Dec. 1.
Hugh Johnson, chairman and chief economist of Johnson Illington Advisors LLC, said the strong level of activity and the reduction in unsold inventory provide evidence that the housing sector is rebounding.
"The signs are — not just for July but for the last four months — that we've passed the worst in housing," he said.
Autos, Aircraft Boost Orders
In a separate report, the Commerce Department said orders for durable goods — products that are meant to last a number of years — soared in July at the fastest pace in two years.
The signs are -- not just for July but for the last four months -- that we've passed the worst in housing.
The report said that orders increased 4.9 percent after dropping 1.3 percent in June. The figures were pushed upward by increased demand for aircraft at Boeing. And increased orders for motor vehicles bolstered the upward trend when Chrysler and General Motors restarted many factories.
Although the numbers looked strong, new orders for durables were off 25.8 percent from the same period last year.
Orders in the transportation sector rose 18.4 percent from June, the biggest in nearly three years. Excluding transportation, new orders rose 0.8 percent in July — continuing their upswing for the third straight month.
Johnson said the transportation orders were boosted by the federal government's Cash for Clunkers program, which saw thousands of consumers trading in their old vehicles for newer, more energy-efficient automobiles.
Ford Motor Co. reported earlier this month that its sales rose 2.4 percent in July over the same period last year. Sales at Chrysler and General Motors declined, but the drops were not as severe as recent months.
It was the second day in a row that U.S. consumers have gotten good news about the economy, which many have said has been in the biggest slump since the Great Depression. On Tuesday, the Standard & Poor's/Case-Shiller index showed an increase of nearly 3 percent in home prices during the second quarter, though the index is still down nearly 15 percent from last year.
Also on Tuesday, the New York-based Conference Board said its consumer confidence index rose to 54.1 in August from 47.4 in July. It was a bigger jump than most analysts had forecast — but well below 90, the minimum figure that indicates people believe the economy is healthy.
A Slow Recovery
While the housing numbers are encouraging, most economists say any recovery will be slow. White House budget officials said Tuesday that the unemployment rate will likely hit 10 percent before the end of the year.
With more people out of work, analysts predict it will take longer to see a rebound in consumer spending, which drives most of the nation's economic growth.
However, an annual survey released Tuesday by two staffing firms says most employers are planning to hire full-time workers in the next 12 months.
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