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U.S. new home sales hit seven-month high; jobless claims rise

A job seeker fills out an application at the King Soopers grocery store table at a job fair at the Denver Workforce Center in Denver, Colorado, U.S. February 15, 2017. REUTERS/Rick Wilking

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 continued to gain momentum despite the challenges of high prices and tight inventories.

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.

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 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 the same month last year, showing the housing market’s resilience.

Last month’s sales were likely partially buoyed by unseasonably warm weather. Although mortgage rates have risen and may go higher, most economists see a limited impact on housing because a tightening labor market is improving employment opportunities for young adults.

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 15,000 to a seasonally adjusted 258,000 for the week ended March 18.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 80 straight weeks. That is the longest stretch since 1970 when the labor market was smaller. The job market is currently near full employment.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose only 1,000 to 240,000 last week.

U.S. stocks were mostly flat as investors focused on whether the House of Representatives would pass a Republican-sponsored bill to begin dismantling Obamacare, which is seen as the first significant policy test for President Donald Trump.

Prices of U.S. Treasuries were trading lower while the dollar <.DXY> was stronger against a basket of currencies.

LABOR MARKET FIRMING

The claims data covered the period during which the government surveyed employers for March’s nonfarm payrolls report. The four-week average of claims fell 7,750 between the February and March survey weeks, suggesting another month of strong job gains.

Job growth has averaged 209,000 per month over the past three months and the unemployment rate is at 4.7 percent, close to the nine-year low of 4.6 percent hit last November. Tightening labor market conditions and rising inflation enabled the Federal Reserve to raise interest rates last week.

The market for new houses is benefiting from a shortage of properties for sale. A report on Wednesday showed a 3.7 percent drop in sales of existing homes in February amid tight inventories and rising house prices. The 30-year fixed mortgage rate is currently around 4.30 percent.

Last month, new single-family homes sales surged 30.9 percent to their highest level since November 2007 in the Midwest and increased 3.6 percent in the South. They jumped 7.5 percent in the West but slumped 21.4 percent in the Northeast.

The inventory of new homes on the market increased 1.5 percent to 266,000 units last month, still less than half of what it was at its peak during the housing boom in 2006.

At February’s sales pace it would take 5.4 months to clear the supply of houses on the market, down from 5.6 months in January.

A six-month supply is viewed as a healthy balance between supply and demand. The median price for a new home fell 4.9 percent to $296,200 in February from a year ago.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. housing starts drop; permits rise to one-year high

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding fell in January as the construction of multi-family housing projects dropped, but upward revisions to the prior month’s data and a jump in permits to a one-year high suggested the housing recovery remained on track.

Other data on Thursday showed only a modest increase in the number of Americans filing new applications for unemployment benefits last week, a sign that the labor market was continuing to tighten.

Housing starts fell 2.6 percent to a seasonally adjusted annual rate of 1.25 million units last month, the Commerce Department said. December’s starts were revised up to a rate of 1.28 million units from the previously reported 1.23 million pace.

Homebuilding was up 10.5 percent compared to January 2016. Permits for future construction jumped 4.6 percent in January to a rate of 1.29 million units, the highest level since November 2015. Building permits in the South, where most homebuilding occurs, hit their highest level since July 2007.

With overall permits now outpacing starts, homebuilding is likely to rebound in the coming months. Economists polled by Reuters had forecast groundbreaking activity slipping to a rate of 1.22 million units last month and building permits rising to a 1.23 million pace.

Prices of U.S. Treasuries slid and U.S. stock index futures trimmed losses after the data. The dollar <.DXY> pared losses against a basket of currencies.

LABOR MARKET TIGHTENING

The housing recovery is being driven by a strong labor market, which is boosting employment opportunities for young people and supporting household formation.

In a separate report, the Labor Department said initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 239,000 for the week ended Feb. 11.

Claims have been below 300,000, a threshold associated with a strong job market, for 102 consecutive weeks. That is the longest stretch since 1970, when the labor market was much smaller. The labor market is at or close to full employment, with the unemployment rate at 4.8 percent.

Economists had forecast first-time applications for jobless benefits rising to 245,000 in the latest week. While the labor market is expected to continue to underpin the housing market, higher mortgage rates could slow demand for housing.

A survey on Wednesday showed homebuilders’ confidence slipped in February but remained at levels consistent with a growing housing market. Builders anticipated a slowdown in buyer traffic and continued to grapple with shortages of developed lots and skilled labor.

January’s starts were above the fourth-quarter average, suggesting housing will again contribute to gross domestic product in the first three months of this year.

Homebuilding last month surged 55.4 percent in the Northeast region of the country. It jumped 20.0 percent in the South to the highest level since August 2007. Starts fell 41.3 percent in the West, likely due to the impact of unusually wet weather.

Last month, single-family homebuilding, which accounts for the largest share of the residential housing market, climbed 1.9 percent to a pace of 823,000 units.

Starts for the volatile multi-family housing segment tumbled 10.2 percent to a rate of 423,000 units.

Single-family permits slipped 2.7 percent last month after increasing for five consecutive months. Single-family starts in the South rose to their highest level since August 2007.

Building permits for multi-family units soared 19.8 percent.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Consumer prices post largest gain in nearly four years

WASHINGTON, Feb 15 (Reuters) – U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting inflation pressures could be picking up.

The Labor Department said on Wednesday its Consumer Price Index jumped 0.6 percent last month after gaining 0.3 percent in December. January’s increase in the CPI was the largest since February 2013.

In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012.

The CPI rose 2.1 percent in the year to December.

Economists polled by Reuters had forecast the CPI rising 0.3 percent last month and advancing 2.4 percent from a year ago.

Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.

The so-called core CPI, which strips out food and energy costs, rose 0.3 percent last month after increasing 0.2 percent in December. That lifted the year-on-year core CPI increase to 2.3 percent in January from December’s 2.2 percent increase.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.7 percent.

Gradually firming inflation and a tightening labor market could allow the Fed to raise interest rates at least twice this year.

Fed Chair Janet Yellen told lawmakers on Tuesday that “waiting too long to remove accommodation would be unwise.”

The U.S. central bank has forecast three rate increases this year. The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 percent to 0.75 percent.

Last month, gasoline prices surged 7.8 percent, accounting for nearly half of the rise in the CPI. That followed a 2.4 percent increase in December.

Food prices edged up 0.1 percent after being unchanged for six straight months.

The cost of food consumed at home was unchanged after dropping for eight consecutive months.

Within the core CPI basket, rents increased 0.3 percent last month after a similar gain in December.

Owners’ equivalent rent of primary residence gained 0.2 percent in January after increasing 0.3 percent the prior month.

The cost of medical care rose 0.2 percent, with the prices for hospital services and prescription medicine both increasing 0.3 percent. Motor vehicle prices shot up 0.9 percent, the largest rise since November 2009.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters

Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))

New York City mayor says ‘affordability crisis’ threatens city

By Hilary Russ

NEW YORK (Reuters) – New York City is threatened by an “affordability crisis” because rising housing prices have significantly outpaced wage growth, Mayor Bill de Blasio said on Monday.

De Blasio used his state of the city address to speak broadly about New Yorkers’ struggles to pay rent and make ends meet and discussed recent proposals, rather than lay out many new proposals.

De Blasio, a Democrat who took office in January 2014, is up for reelection in November.

Held at the historic Apollo Theater in Harlem, home to numerous American musical legends including Billie Holiday, the program featured at least 45 minutes of introductory remarks that were a mostly a love story to the city’s diversity.

“So many people in this city are afraid they cannot stay in the city that they love,” because of high costs, de Blasio said.

De Blasio cited a long list of what he considers some of his biggest accomplishments, including the implementation of neighborhood policing and the highest ever four-year high-school graduation rate of 72.6 percent in 2016.

He said residents would hear in coming weeks more details of forthcoming proposals about homelessness, opioid addiction and the creation of more higher paying jobs, which he called the “next frontline.”

He said the city would strive to create 100,000 more permanent good jobs that pay at least $50,000 a year.

Last week, de Blasio released information about other proposals that he touched on in his speech, including ways to help seniors and low-income people afford housing by adding new units and providing more rental assistance.

He said previously that he would seek to add 10,000 apartments for households earning less than $40,000 a year, half of which would be reserved for seniors, while another 500 would be for veterans.

De Blasio referenced another element of the plan announced last week to help more than 25,000 older residents with rent of up to $1,300 a month through the city’s “mansion tax,” which he has proposed before.

“You will hear people say it cannot be done,” de Blasio said of the tax. “They will say you cannot get it through Albany,” using the state capital to refer to the state government, whose approval would be required for the tax.

The mansion tax would bring in $336 million on the sale of homes over $2 million, he said.

“We’re not going to give tax breaks to people doing well,” de Blasio said. “We’re going to ask them to do more.”

(Reporting by Hilary Russ; Editing by Leslie Adler)

Higher gasoline, rental costs boost U.S. consumer inflation

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose in December as households paid more for gasoline and rental accommodation, leading to the largest year-on-year increase in 2-1/2 years and signaling that inflation pressures could be building.

The Labor Department said on Wednesday its Consumer Price Index rose 0.3 percent last month after gaining 0.2 percent in November. In the 12 months through December, the CPI increased 2.1 percent, the biggest year-on-year gain since June 2014. The CPI rose 1.7 percent in the year to November.

The increases were in line with economists’ expectations. The CPI rose 2.1 percent in 2016, up from a gain of 0.7 percent in 2015.

U.S. Treasury prices fell and the dollar strengthened against the euro and yen after the data. U.S. stock index futures were trading higher.

Rising inflation comes against the backdrop of a strengthening economy and tightening labor market, which raises the specter of a faster pace of interest rate increases from the Federal Reserve than currently anticipated.

The U.S. central bank has forecast three rate hikes this year. It raised its benchmark overnight interest rate by 25 basis points to a range of 0.50 percent to 0.75 percent last month.

Price pressures are likely to remain on an upward trend amid expectations of fiscal stimulus from the incoming Trump administration. Republican businessman-turned-politician Donald Trump, who will be sworn in as U.S. president on Friday, has pledged to increase spending on infrastructure and cut taxes.

The so-called core CPI, which strips out food and energy costs, rose 0.2 percent last month after the same increase in November. As a result, the core CPI increased 2.2 percent in the 12 months through December, from 2.1 percent in November.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent.

Last month, gasoline prices jumped 3.0 percent after climbing 2.7 percent in November. Food prices were unchanged for a sixth straight month. The cost of food consumed at home dropped for an eighth consecutive month.

Within the core CPI basket, housing continued its upward march in December. Rents increased 0.3 percent last month, with owners’ equivalent rent of primary residence also rising 0.3 percent. Rents increased 4.0 percent in 2016.

The cost of medical care rose 0.2 percent last month, with the prices for doctor visits unchanged. Prices for prescription medicine increased 0.2 percent. The cost of hospital services rose 0.3 percent.

There were price increases for a range of other goods and services last month including motor vehicle insurance, which increased 0.8 percent. The cost of airline fares rose 1.9 percent in December after falling 1.3 percent in November.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. home sales near 10-year high as mortgage rates rise

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. home resales unexpectedly rose in November, reaching their highest level in nearly 10 years, likely as buyers rushed into the market to lock in mortgage rates in anticipation of further increases in borrowing costs.

The third straight monthly increase in existing home sales, reported by the National Association of Realtors on Wednesday, suggested housing would contribute to economic growth in the fourth quarter after being a drag in the previous two quarters.

“The strength in home sales, if it holds, will provide a big boost for consumer spending in 2017 and makes us more confident about our outlook for stronger growth next year,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

Existing home sales increased 0.7 percent to an annual rate of 5.61 million units last month, the highest sales pace since February 2007. October’s sales pace was revised down to 5.57 million units from the previously reported 5.60 million units.

Economists had forecast sales slipping 1.0 percent toa 5.50 million-unit pace in November. Sales were up 15.4 percent from a year ago. They rose in the Northeast and South, but fell in the Midwest and West last month. Mortgage rates have surged in the wake of Donald Trump’s victory in the Nov. 8 presidential election. Trump’s proposal to increase infrastructure spending and slash taxes is seen as inflationary.

Since the election, the interest rate on a fixed 30-year mortgage has increased about 60 basis points to an average 4.16 percent, the highest level since October 2014, according to data from mortgage finance firm Freddie Mac.

Mortgage rates are expected to rise further after the Federal Reserve raised its benchmark overnight interest rate last week by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank forecast three rate hikes next year.

The prospect of higher mortgage rates could be pushing undecided buyers into the market. But the combination of higher borrowing costs and rising house prices, which are outstripping wage growth, could hurt home sales.

House prices have been marching ahead amid a chronic shortage of properties for sale. The median house price was $234,900 last month, a 6.8 percent increase from a year ago.

Economists, however, expect higher mortgage rates to have a minimal impact on home sales as the labor market nears full employment and the economy strengthens.

‘AT A CROSSROADS’

“This is a housing market at a crossroads,” said Stephen Phillips, president of Berkshire Hathaway Home Services in California.

“The higher mortgage rates we’ve seen since the election will likely slow activity and price increases, but faster income growth might more than offset that trend as we look toward next year’s spring market.”

A separate report from the Mortgage Bankers Association on Wednesday showed applications for loans to buy a home increased 3 percent last week from the previous week.

The dollar <.DXY> was trading lower against a basket of currencies after the data, while prices for U.S. government bonds rose. U.S. stocks were slightly weaker, with the Dow Jones industrial average <.DJI> still hovering near the 20,000 mark.

The PHLX housing index <.HGX> rose 0.30 percent as shares in the nation’s largest homebuilder, D.R. Horton Inc <DHI.N>, gained 0.32 percent.

Last month’s increase in home resales means more brokers’ commissions, which are included in the residential component of the gross domestic product report.

The Atlanta Fed is forecasting GDP rising at a 2.6 percent annual rate in the fourth quarter. The economy grew at a 3.2 percent pace in the July-September period.

Existing home sales remain constrained by a persistent shortage of properties available for sale. Last month, the number of unsold homes on the market fell 8.0 percent from October to 1.85 million units.

Supply was down 9.3 percent from a year ago and has now declined for 18 straight months on a year-on-year basis. At November’s sales pace, it would take 4.0 months to clear the stock of houses on the market, down from 4.3 months inOctober. A six-month supply is viewed as a healthy balance between supply and demand.

Housing inventory could remain an obstacle, with a report last week showing a plunge in home construction in November. With supply tightening, house prices notched their 57th consecutive month of year-on-year gains in November.

Rising house prices are increasing equity for homeowners and encouraging some to put their homes on the market, but making it more difficult for first-time buyers to purchase homes.

First-time buyers accounted for 32 percent of transactions last month, well below the 40 percent share that economists and realtors say is needed for a robust housing market.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. housing starts tumble, flooding in the South blamed

Roofers work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. housing starts fell more than expected in August likely as bad weather disrupted building activity in the South, but a solid increase in permits for single-family dwellings suggested demand for housing remained intact.

Tuesday’s weak housing report came as officials from the Federal Reserve were due to gather for a two-day meeting to assess the economy and deliberate on monetary policy.

It joined a stream of recent soft economic data such as retail sales, nonfarm payrolls and industrial production, which, together with low inflation are expected to encourage the U.S. central bank to leave interest rates unchanged on Wednesday.

Groundbreaking decreased 5.8 percent to a seasonally adjusted annual pace of 1.14 million units after two straight months of strong gains, the Commerce Department said.

Single-family housing starts in the South, which accounts for the bulk of home building, tumbled 13.1 percent to their lowest level since May 2015. Economists said flooding in Texas and Louisiana was probably behind the drop in starts last month.

“We believe that the slowdown in August starts likely owes to a temporary weather effect rather than a substantive shift in the underlying trend,” said Rob Martin, an economist at Barclays in New York. “Excluding the South, housing starts increased a robust 4.2 percent.”

Permits for future construction slipped 0.4 percent to a 1.14 million-unit rate last month as approvals for the volatile multi-family homes segment tumbled 7.2 percent to a 402,000 unit-rate. Permits for single-family homes, the largest segment of the market, surged 3.7 percent to a 737,000-unit pace.

Economists polled by Reuters had forecast housing starts falling to a 1.19 million-unit pace last month and building permits rising to a 1.17 million-unit rate.

U.S. financial markets were little moved by the data as investors awaited Wednesday’s outcome of the Fed’s meeting. The broader PHLX housing index, which includes builders, building products and mortgage companies, fell 0.76 percent.

STRONG HOUSING FUNDAMENTALS

Last month’s decline in starts was largely anticipated as groundbreaking activity has been running well ahead of permits approvals over the past several months, especially in the single-family housing segment.

The drop left starts just below their second-quarter average, suggesting little or no contribution from residential construction to economic growth in the third quarter.

Spending on home building was a small drag on output in the April-June period. Following the report, the Atlanta Fed trimmed its third-quarter gross domestic product estimate by one-tenth of a percentage point to a 2.9 percent annual rate. The economy grew at a 1.1 percent rate in the second quarter.

Demand for housing is being driven by a tightening labor market, which is lifting wages. A survey of homebuilders published on Monday showed confidence hitting an 11-month high in September, with builders bullish about current sales now and over the next six months, as well as prospective buyer traffic.

Housing market strength boosted Lennar Corp’s profits in the third quarter. Lennar, the second-largest U.S. homebuilder, said it sold 6,779 homes in the three months ended Aug. 31, up 7.3 percent from a year earlier, while its average sales price rose more than 3 percent.

“Conditions seem well aligned for strong new home building. Borrowing costs remain low, the inventory of homes for sale, both new and existing, are relatively low and failing to make meaningful progress,” said Kristin Reynolds, a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Groundbreaking on single-family homes dropped 6.0 percent to a 722,000-unit pace in August, the lowest level since last October. But with permits for the construction of single-family homes rising last month, single-family home building could rebound in the months ahead.

The single-family housing market is being supported by a dearth of previously owned homes available for sale.

Housing starts for the volatile multi-family segment fell 5.4 percent to a 420,000-unit pace. The multi-family segment of the market has been buoyed by strong demand for rental accommodation as some Americans shun homeownership in the aftermath of the housing market collapse.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. single-family home sales fell in March

A new subdivision project of residential homes in shown in Glenelg, Maryland

By Lucia Mutikani

WASHINGTON (Reuters) – New U.S. single-family home sales unexpectedly fell in March, but the decline was concentrated in the West region, suggesting that the housing market continued to strengthen.

The Commerce Department said on Monday new home sales decreased 1.5 percent to a seasonally adjusted annual rate of 511,000 units. February’s sales pace was revised up to 519,000 units from the previously reported 512,000 units.

Sales rose in the Midwest and South, but tumbled in the West and were unchanged in the Northeast.

Economists polled by Reuters had forecast new home sales, which account for about 8.7 percent of the housing market, rising to a 520,000 unit-rate last month.

U.S. financial markets were little moved by the data.

New home sales are volatile month-to-month. The decline in sales over the past three months likely does not signal a slowdown in the housing market, given a strong labor market and historically low mortgage rates.

A report last week showed a 5.1 percent surge in sales of previously owned homes in March.

The housing market is bucking a broadly weak economy, with data such as trade, industrial production, business spending and retail sales suggesting the economy lost considerable momentum in the first quarter after logging a 1.4 percent annualized growth rate in the fourth quarter.

First-quarter gross domestic product estimates are as low as a 0.3 percent rate. The government will release the advance first-quarter GDP estimate on Thursday.

The demand for housing is being fueled by a robust labor market, characterized by the lowest unemployment benefit claims since 1973, and mortgage rates near record lows. Labor market strength has increased employment opportunities for young adults, boosting household formation.

But a shortage of properties for sale, which is limiting choice for buyers and driving up prices, remains a constraint for the housing market.

Last month, the inventory of new homes on the market rose 2.1 percent to 246,000 units, the highest since September 2009. Despite the increase, new housing stock remains less than half of what it was at the height of housing bubble.

At March’s sales pace it would take 5.8 months to clear the supply of houses on the market. That was the most since last September and was up from 5.6 months in February.

New single-family homes sales surged 18.5 percent in the Midwest and climbed 5.0 percent in the populous South.

Sales plunged 23.6 percent in the West, reversing February’s 21.7 percent jump. The West has seen a sharp increase in home prices amid tight inventories.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. existing home sales tumble in warning sign for economy

WASHINGTON (Reuters) – U.S. home resales fell sharply in February in a potentially troubling sign for America’s economy which has otherwise looked resilient to the global economic slowdown.

The National Association of Realtors said on Monday existing home sales dropped 7.1 percent to an annual rate of 5.08 million units, the lowest level since November.

Sales have been volatile and prone to big swings up and down in recent months following the introduction in October of new mortgage regulations, which are intended to help homebuyers understand their loan options and shop around for loans best suited to their financial circumstances.

February’s decline weighed on investor sentiment, with the S&P 500 stock index falling after the data was released.

Sales fell across the country, including a 17.1 percent plunge in the U.S. Northeast.

Economists had forecast home resales decreasing 2.8 percent to a pace of 5.32 million units last month. Sales were up 2.2 percent from a year ago.

The median price for a previously owned home increased 4.4 percent from a year ago to $210,800.

The housing report runs counter to data showing strong job growth and a stabilization of factory output, which had taken a hit from weaker demand overseas and a strong U.S. dollar.

Housing continues to be supported by a tightening labor market, which is starting to push up wage growth, boosting household formation. But a relative dearth of properties available for sale remains a challenge.

“Finding the right property at an affordable price is burdening many potential buyers,” said NAR economist Lawrence Yun.

In February, the number of unsold homes on the market rose 3.3 percent from January to 1.88 million units, but was down 1.1 percent from a year ago.

At February’s sales pace, it would take 4.4 months to clear the stock of houses on the market, up from 4.0 months in January. A six-month supply is viewed as a healthy balance between supply and demand.

(Reporting by Jason Lange; Editing by Andrea Ricci)

Strong U.S. housing data offers ray of hope for slowing economy

WASHINGTON (Reuters) – U.S. home resales rebounded strongly in December from a 19-month low and prices surged, indicating the housing market recovery remained intact despite signs of a sharp deceleration in economic growth in recent months.

The National Association of Realtors said on Friday existing home sales jumped a record 14.7 percent to an annual rate of 5.46 million units, after being temporarily held back by the introduction of new mortgage disclosure rules, which had caused delays in the closing of contracts in November.

Sales were also boosted by unseasonably warm weather. November’s sales pace was unrevised at 4.76 million units. Economists polled by Reuters had forecast home resales rebounding 8.9 percent to a 5.20-million rate.

Sales rose 6.5 percent to 5.26 million units in 2015, the strongest since 2006. Last month’s snap-back suggests that

November’s slump was a blip and should offer some assurance that domestic demand remains fairly healthy, even as growth appears to have braked sharply at the end of 2015 because of a downturn in manufacturing and mining activity.

“While the carryover of November’s delayed transactions into December contributed to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” said Lawrence Yun, NAR chief economist.

Housing is being supported by a strengthening labor market, which has resulted in an acceleration in household formation. Sales, however, remain constrained by a dearth of homes available for sale, which is limiting choice for buyers.

The economy has been hammered by a strong dollar, slowing global demand and deep spending cuts in the energy sector. Businesses are also placing fewer orders with factories while trying to reduce piles of unsold merchandise, which also is putting pressure on the economy.

The dollar was trading higher against a basket of currencies, while prices for U.S. government debt fell. The housing index rallied 3.6 percent, outperforming a broadly firmer U.S. stock market. Shares in the nation’s largest homebuilder D.R. Horton Inc surged 4.16 percent and Lennar Corp advanced 3.9 percent.

A separate report hinted at some stabilization for the downtrodden manufacturing sector. Data firm Markit said its Purchasing Managers Index bounced back in early January from December’s 38-month low as output and new business volumes increase at faster rates.

Weak reports on retail sales, inventories, exports and industrial production have left economists estimating that gross domestic product increased at an annual rate of less than 1 percent in the fourth quarter after expanding at a 2 percent pace in the July-September quarter.

A massive stock market sell-off, which has seen a sharp drop in the Standard & Poor’s 500 index since Dec. 31, is also adding to gloom over the economy.

In December, the number of unsold homes on the market tumbled 12.3 percent from November to 1.79 million units, the lowest level since January 2013. Supply was down 3.8 percent from a year ago. At December’s sales pace, it would take 3.9 months to clear the stock of houses on the market, the fewest since January 2005. That was down from 5.1 months in November.

A six-months supply is viewed as a healthy balance between supply and demand. With inventories still tight, the median house price jumped 7.6 percent from a year ago to $224,100. House prices increased 6.7 percent in 2015.

Although higher prices could sideline potential buyers, especially those wanting to purchase a home for the first time, they are boosting equity for homeowners, which could encourage them to put their homes on the market.

Realtors and economists say insufficient equity has contributed to the tight housing inventories. Last month, the share of first-time buyers was 32 percent, up from 30 percent in November and the highest share since August.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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