Consumers to factories are fueling expansion

By Rhonda J. Miller
PBN Staff Writer

Consumers and companies are starting to act as if the U.S. economic expansion is here to stay. More

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ECONOMY

Consumers to factories are fueling expansion

By Rhonda J. Miller
PBN Staff Writer

Posted 7/1/13

Consumers and companies are starting to act as if the U.S. economic expansion is here to stay.

Purchases of new homes jumped in May to a five-year high, while business-investment plans improved for a third straight month, figures from the Commerce Department showed last week in Washington. The last time households were this confident was in January 2008, according to another report.

The data point to the self-sustaining expansion the Federal Reserve is seeking to nurture as rising property values boost household wealth and spending, while businesses invest in new equipment to meet growing demand.

“It’s all good news,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The economy is going to gain traction.”

Builders sold 476,000 new properties at an annualized rate in May, a 2.1 percent gain from April, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department figures showed. The median selling price climbed to $263,900, up 10.3 percent from May 2012.

Lennar Corp. is among builders seeing increased sales, orders and higher average purchase prices. The third-largest U.S. homebuilder by revenue last week reported second-quarter earnings that beat analysts’ estimates.

Miami-based Lennar delivered 4,464 houses, compared with 3,222 homes a year earlier, while the average sales price increased to $283,000 from $250,000. Orders rose 27 percent.

Values of existing properties are also picking up. Home prices in 20 U.S. cities rose 12.1 percent in April from the same month in 2012, the biggest year-over-year gain since March 2006, a report from S&P/Case-Shiller showed. The 1.7 percent increase in April from the prior month followed a 1.9 percent March advance, marking the biggest back-to-back gains since records began in 2000.

The demand for housing is driving residential construction and aiding the economic expansion. Consumers who long held off on purchases are entering the market even as borrowing costs rise, encouraged by the increases in property values and gains in employment.

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