U.S. New Home Sales Rise By Most in Almost 13 Years (Correct)
(Corrects historical in first paragraph.)
By Joe Richter
April 26 (Bloomberg) -- Sales of new homes in the U.S. snapped back in March, rising by the most in almost 13 years and led by demand for less-expensive houses.
Purchases jumped 13.8 percent, the most since April 1993 and exceeding the highest forecast, to an annual rate of 1.213 million from 1.066 million in February, the Commerce Department said today in Washington. The median price dropped 2.2 percent from the same month last year to $224,200.
The figures come a day after a report showed sales of previously owned homes unexpectedly rose in March, suggesting an improving labor market is providing support to housing even as borrowing costs rise. Yields on U.S. Treasury securities rose after the report suggested Federal Reserve policy makers will keep raising interest rates to ensure that economic growth doesn't stoke inflation.
``Everything points to a strong labor market, and if people have jobs they will still buy houses,'' Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York, said before the report. ``There will be a gradual slowdown in housing, but the economy is still strong.''
New home sales, recorded when a contract is signed, are considered by economists a leading indicator of the housing market. Sales of previously owned homes rose 0.3 percent last month to an annual rate of 6.92 million, the National Association of Realtors said yesterday. Resales make up 85 percent of the housing market and are counted when the sale is closed.
The drop in the median selling price of a new home over the last 12 months was the first since December 2003. The decrease reflected a jump in purchases of homes priced between $150,000 and $299,999 and fewer sales of higher-priced houses compared with March 2005.
Economists' Forecasts
Economists expected new home sales to rise to a 1.11 million rate from February's originally reported 1.08 million, according to the median of 61 forecasts in a Bloomberg News survey. Estimates in the survey ranged from a 1.01 million rate to 1.18 million.
The number of unsold homes fell to 5.5 months' worth at the current sales pace from 6.3 months in February. The number of homes for sale at the end of March was a record 555,000.
Home prices probably will rise 8.7 percent in 2006 from a year earlier, slowing from a 13 percent pace in 2005, Freddie Mac said in a report April 10. That would be the slowest growth rate since 2003, when home prices rose 8 percent.
Sales rose in all four regions, today's report showed. They rose 36 percent in the West to 319,000; 11 percent in the Midwest to 194,000; 6.9 percent in the South to 633,000; and 4.7 percent in the Northeast to 67,000.
Federal Reserve
The Fed has raised its overnight lending rate 15 straight times since June 2004 to keep inflation under control, and there are signs that long-term rates are also beginning to rise on inflation concerns. The average rate on a 30-year fixed-rate mortgage rose to 6.53 percent last week, the highest in almost four years, Freddie Mac said.
Affordability dropped to a 14-year low in the fourth quarter because of higher home prices and borrowing costs, according to the National Association of Realtors.
``I am worried about the potential for a trailing-down process that gains some momentum'' in the housing market, David Seiders, chief economist of the National Association of Home Builders, said in an April 17 interview. ``I hope the Fed doesn't overshoot'' on raising interest rates.
The Mortgage Bankers Association's index of applications to purchase a home has fallen 11 percent this year through mid-April, and a National Association of Home Builders report last week showed optimism among U.S. builders at the lowest level in more than four years. Builders started work last month on the fewest number of new houses in a year during March.
Purchase Plans
The share of consumers planning to buy a home in the next six months fell to 2.7 percent in April, the lowest since November 2004, from 4.1 percent, the New York-based Conference Board said yesterday.
D.R. Horton Inc., the largest U.S. homebuilder, said earnings in the quarter ended March 31 rose at the slowest pace in five years. Orders for D.R. Horton houses rose 9.5 percent to 15,771 in the quarter, a third of the gain in the year-earlier period, the company said on April 11.
Rising mortgage rates are not only slowing home purchases, they're reducing mortgage refinancing, which has been a source of cash for consumers through the current expansion.
The unemployment rate in March dropped to 4.7 percent, matching a four-year low, and hourly wages in March were 3.4 percent higher than a year earlier, a government report this month showed.
Economic Growth
The economy probably expanded at a 4.9 percent rate in the first quarter, the fastest since the third quarter of 2003, according to a Bloomberg News survey before the April 28 report. Growth will slow to a 3 percent rate by the end of the year, according to a separate survey taken earlier this month.
Home sales will fall 8 percent this year, according to a forecast by Freddie Mac. Sales will decline to 6.9 million from 7.5 million last year, McLean, Virginia-based Freddie Mac, the second-largest buyer of mortgages, said in a report. It would be the first year since 2003 that sales were below 7 million.
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