WASHINGTON (Reuters) - U.S. home resales jumped more than expected in December and claims for new jobless claims last week posted their biggest decline in nearly a year, showing two key economic trouble spots on the mend.
Other reports also offered reason for optimism, with mid-Atlantic factory activity holding up well and an index of leading indicators surpassing economists’ forecasts.
The raft of positive data on Thursday renewed hope that 2011 growth will surpass last year’s performance, which was not robust enough to put a meaningful dent in the nation’s elevated 9.4 percent unemployment rate.
“Most of the reports today were fairly good. For anyone skeptical about the U.S. recovery, these should ease concern,” said Kathy Lien, director of research at GTF Forex in New York.
Despite the barrage of better news, stock prices were dragged lower by technology and materials shares. Bond prices dropped, pushing the benchmark yields that help determine mortgage rates higher. The U.S. dollar rallied.
U.S. existing home sales soared 12.3 percent to an annual rate of 5.28 million units as sellers cut prices, the National Association of Realtors said. Economists had only expected a rise to 4.85 million. Still, a rise in distressed sales raised questions about the rebound’s sustainability.
Applications for new jobless benefits posted their biggest decline in nearly a year, pointing to steady if slow improvement in the labor market. Claims retreated to 404,000 from 441,000 in the prior week, the Labor Department said.
The Philadelphia Federal Reserve Bank measure of Mid-Atlantic manufacturing showed a modest pullback to 19.3 in January from 20.8 in December, but strong underlying components.
Prices paid jumped sharply as global commodity prices remained high. The new orders index more than doubled, while the survey’s employment index, though still soft, reached its highest level since April 2006.
The Conference Board’s index of leading economic indicators spiking up 1 percent, above forecasts for a 0.6 percent gain.
Strength overseas appeared to be helping the United States along by boosting demand for U.S. exports, a key goal set by President Barack Obama. China finished 2010 with a bang, with a report showing GDP growth surging to 9.8 percent in the fourth quarter released just as President Hu Jintao wrapped up a state visit to Washington.
The U.S. economy has been growing for a year and a half but the pace of growth has not been enough to significantly lower unemployment, which stood at 9.4 percent in December.
A weak job market could thwart housing activity further by denting consumer confidence.
That’s part of the reason Federal Reserve officials, who will meet next week to discuss monetary policy, made a controversial commitment in November to purchase an additional $600 billion in government bonds to support the recovery.
The rebound in home sales came despite a bout of bad winter weather across many parts of the country last month.
A jump in mortgage rates may have forced some buyers into the market by raising concern of even further increases, said Lawrence Yun, chief economist at the Realtor’s trade group. Yun said he expects 2011 sales to total around 5.2 million units, with prices remaining stable.
Some economists were skeptical of the rise. Median home prices in December fell to $168,800, down from $170,200 in November and the lowest since February 2010. That was in part because properties considered “distressed” accounted for 36 percent of sales, up from 33 percent in November.
“It is quite possible the big increase reflects foreclosed properties and short sales,” said Mark Vitner, senior economist at Wells Fargo in Charlotte, North Carolina. “Banks likely wanted them off their books toward the end of year. There does not seem to be a whole lot of momentum in the housing sector and we will not see much improvement until we move past this mountain of foreclosures.”
Faulty documentation in a loosely regulated housing market has led to disputes over foreclosures, creating a backlog that could flood the market with new inventory.
For now, the market appeared to be making progress in reducing the stock of housing, with the available supply of homes for sale falling sharply in December to 8.1 months’ worth from 9.5 months’ worth in November.
Sales peaked above an annual rate of 7 million units in September 2005 as the housing bubble reached fever pitch. They hit a 15-year low below 4 million units in mid-2010 after the market collapsed, triggering a widespread financial crisis. For 2010 as a whole, sales were down 2.9 percent.
Additional reporting by Doug Palmer and Emily Kaiser in Washington, and Chris Reese in New York