U.S. new-home sales posted their strongest month in more than eight years with prices jumping to a record level, an indication of growing confidence in the economy's prospects.
The Commerce Department reported Tuesday that purchases of new, single-family homes jumped 16.6% from a month earlier to a seasonally adjusted annual rate of 619,000,the fastest pace since January 2008.
Tuesday's report offered further evidence that the economy was gathering speed after growth slowed to a 0.5 percent annualized rate in the first quarter and pointed to a probable Federal Reserve interest rate hike as soon as June.
Rate Hike Likely in June
Following last week’s publication of the minutes from the Fed's April 26-27 policy meeting most officials voiced their approval to raise rates at the next FOMC meeting if data continued to point to an improvement in second-quarter growth. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.
The new home sales report came in the wake of fairly upbeat data on home re-sales and residential construction.
The median price of a new home—the point at which half of homes were sold above and half sold below—rose to $321,100 last month, up 9.7% from a year earlier and the highest level on record.
According to Chris Rupkey, chief economist at MUFG Union Bank in New York, "Consumers are taking the leap and buying the biggest of big ticket items of their lives and this speaks to confidence. The Federal Reserve can raise rates at their June meeting without fear the economy is going to slow."