The housing market and the manufacturing industry, which were at the epicenter of the deepest economic downturn in seven decades, each experienced significant gains in July, buttressing the view that the longest postwar recession may soon be ending.
New-home sales jumped by 9.6 percent in July, increasing for the fourth month in a row and reaching their highest annual rate since the economy and financial markets imploded in September, the Commerce Department reported Wednesday.
New orders for long-lasting goods increased in July by the largest amount in two years, signaling that the manufacturing industry is beginning to rebound from the deepest recession since the Great Depression.
Orders for durable goods, items that are expected to last at least three years, climbed by 4.9 percent last month, the Commerce Department also reported Wednesday. It was the third increase in the past four months.
Orders for transportation equipment jumped 18.4 percent, including a 0.9 percent increase in motor vehicles and a 107 percent rise in aircraft. Boeing enjoyed its best month for orders so far this year.
“The success of ‘cash for clunkers’ points to further auto increases in coming months as manufacturers replenish depleted inventories,” said Nigel Gault, chief U.S. economist for IHS Global Insight. Earlier this month, the Federal Reserve reported than manufacturing output increased in July for the first time since October and just the second time since the recession began in December 2007.
New-home sales reached an annual pace of 433,000 last month, 32 percent above the low point reached in January. However, July sales were still 13 percent below year-earlier levels, the Commerce report showed. And they were down 69 percent from their peak of nearly 1.4 million, which was reached in July 2005.
“The current pace remains very weak,” said Celia Chen, a housing analyst at Moody’s Economy.com. “However, an upward trend is emerging and will help to encourage homebuilding, to the benefit of the broader economy.”
The median sales price of a new home in July was $210,100. That was $27,200 (or 11.5 percent) below the July 2008 median price of $237,300. Half the homes sold above the median price and half sold below.
The report on new homes comes on the heels of positive developments in existing-home sales, which have also increased four months in a row, according to a recent report by the National Association of Realtors.
Moreover, prices for previously owned houses appear to be bottoming out after declining for three years. The S&P/Case-Shiller National Home Price Index, released Tuesday, revealed that average home prices increased 2.9 percent during the second quarter, the first rise in three years.
Average home prices across the United States are now at levels that prevailed in early 2003. Today’s average prices are more than 30 percent below their peak reached during the second quarter of 2006.
Despite the unquestioned improvement in home affordability, don’t expect a quick return to the golden years of new-home sales, Ms. Chen cautioned. “The dark days are over for housing, but full recovery will be slow,” she said.
“Not only are the typical demand drivers for housing such as income and job growth exceptionally weak,” she said, “but the ample supply of [foreclosure-related] distressed existing homes is siphoning off demand for new homes.”