New-Home Sales Jump 8.9% Last Month

Sales of new homes surged by 8.9% in March, the largest monthly increase in nine months, as mortgage rates bottomed out before starting to ascend.

The increase pushed sales of new, single-family houses to a record seasonally adjusted annual rate of 1.23 million last month. That was up from 1.13 million in February, the Commerce Department reported Monday.

New-home sales soared 19.3% in the South, hitting a record rate of 613,000. But in the Northeast, sales plummeted 24.3% to a rate of 78,000. The West posted an increase of 5.1% to a pace of 349,000, and in the Midwest, sales rose 5% to 188,000.

Nationwide, the median sales price of a new home in March dropped to $201,400 from a revised $210,000 in February. The median price is the point at which half sell for more and half sell for less.

Last month’s sales increases were powered by low mortgage interest rates, with 30-year, fixed rates falling to a record low for the year of 5.38% the week ended March 18.

Home buyers scrambled to take advantage of those low rates before they disappeared.

Increasing signs that the economy’s recovery is gaining momentum, including a relatively good employment report for March, have pushed bond rates up, causing long-term mortgage rates also to rise.

Rates on 30-year, fixed-rate mortgages have risen for five straight weeks, climbing to their highest level of the year last week. The average rate last week was 5.94%, according to mortgage giant Freddie Mac.

Rising rates probably won’t slow new-home sales for a couple of months, analysts said. After that, the job market should improve enough to keep sales strong.

Fed Chairman Alan Greenspan told Congress last week that the recovery was solidly on track and that at some point short-term interest rates must rise to keep inflation in check. But he didn’t say when that might happen.