New Home Sales Rise 4% in March
New home sales increased in March for the second consecutive month, the government said Friday, providing new confirmation that the housing industry has shaken off its stock market crash jitters.
The 4% rise in March, on top of an even stronger 14.1% jump in February, pushed sales to the highest levels since August, according to a joint release of the departments of Housing and Urban Development, and Commerce. However, the pace was still 9% below last year.
Analysts predicted that this healthy, but modest, sales level would continue into summer, but said rising mortgage interest rates threaten to choke off growth in the second half of the year.
New single-family homes were sold at a seasonally adjusted rate of 655,000 units last month.
Sales had dropped 5.8% in January, 6.2% in December and 4.3% in November, raising fears that weakness in housing could spread to other sectors of the economy and help push the country into a recession.
“I am pleased to see we are picking up the pace,”’ said Mark Obrinsky, an economist for the U.S. League of Savings Institutions. “But I doubt that we will see much further pickup.”
May Help Sales
Rates on 30-year, fixed-rate mortgages, which had risen above 11.5% just before the Oct. 19 stock market crash, dipped below 10% in February and March. But, they have since edged up to 10.3%.
In the short term, rising rates may actually help sales, said Kent W. Colton, vice president of the National Assn. of Home Builders, because “buyers will realize rates have bottomed out and will want to lock in a rate before they go up higher.”
However, analysts expect rates to be approaching pre-crash levels by the end of the year and said that could dampen housing activity.
New home sales this year are following a pattern established by sales of existing homes and construction starts of new homes.
Sales of existing homes increased 2.5% in March after an identical increase in February, according to the National Assn. of Realtors. The Commerce Department said construction of single-family homes jumped 7.1% in March after a 8.9% increase in the previous month.
The March increase in new home sales was accompanied by a sharp decline in prices. The median, or mid-point, price of new homes was $101,100 in March, down 8.1% from February, which in turn was 6.8% lower than the January record of $118,000.
