New home sales data for April from the Commerce Dept. showed a seasonally adjusted monthly increase of 16.2% to 981,000 units, the highest in 14 years, far exceeding expectations of a slight up-tick. However, the median price for new homes fell a record 11.1% to $229,100. 
The drop suggests builders may be cutting prices to move inventory. Unit sales gains were led by the Northeast, which jumped 43.1%, but sales fell elsewhere: Midwest -28.1%, West -25.4% and South -3.4%. The SPDR S&P Homebuilders ETF rallied as much as 3.4%, but ended unchanged at $35.75. Among homebuilders, Toll Brothers gained 1% to $30.07 and both Hovnanian and KB Home rose 0.7% to $25.81 and $46.54, respectively. In other economic data news, April durable goods orders rose a more-than-expected 0.6%. Economists had forecast no change. The March figure was revised to 5.0%, from 4.3%. The Dow Jones rallied nearly 100 points in early trading, but went on to lose 84 points (0.6%) to 13,441. The S&P 500 reversed a 0.5% gain into a 1% loss to 1,507.51.
Sources: Associated Press, MarketWatch
Commentary: New Home Sales Up (But Beware Double Digit Monthly Gains) • The National Association of Realtors Predicts the First Drop in Home Prices Since 1968 • Buying Homebuilders On The Good News
Stocks/ETFs to watch: Toll Brothers (TOL), Hovnanian Enterprises (HOV), KB Home (KBH). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB), S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), NASDAQ 100 Trust Shares ETF (QQQQ)
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