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U.S. March New Home Sales Rise 12.2% to a Record 1.431 Mln Rate

U.S. March New Home Sales Rise 12.2% to a Record 1.431 Mln Rate

April 26 (Bloomberg) -- U.S. new home sales unexpectedly increased last month to the highest level on record, adding to evidence housing will continue to contribute to economic growth.

Purchases rose 12.2 percent to a 1.431 million annual rate in March following a 1.275 million pace in February, the Commerce Department said today in Washington. Economists forecast a 1.19 million sales rate in March, according to the median estimate in a Bloomberg News survey.

Sales so far this year have averaged a 1.295 million rate, compared with last year's record 1.2 million. Mortgage rates within a percentage point of a four-decade low and increased employment are encouraging buyers, helping power the economy.

``The housing sector has been a tremendous boost to the economy,' said Timothy Rogers, chief economist at Briefing.com in Boston, before the report. Housing ``absolutely' could have another record year this year, he said.

Economists forecast new home sales would decline after February's previously reported 1.226 million pace, according to the median of 62 estimates in a Bloomberg survey. Projections ranged from a 1.1 million sales rate to 1.28 million.

Sales so far this year are exceeding industry forecasts. Some 1.151 million homes will be sold this year, second only to the record 1.2 million bought in 2004, according to an April 5 forecast by the National Association of Home Builders. The homeownership rate was 69.1 percent in the first quarter, close to the 69.2 percent rate of the prior three months, which matched an all-time high, the government said on April 25.

Contribution

Residential investment contributed 0.19 percentage point to the 3.8 percent rise in gross domestic product in the fourth quarter. While that was more than the prior three months, it was less than the 0.86 percentage point in the second quarter.

Sales rose in three of four regions. They increased 21.9 percent in the Midwest to 217,000 at an annual pace; 13.8 percent in the South to a record 733,000; and 9.9 percent in the West to 399,000. They fell 8.9 percent in the Northeast to 82,000.

The median price fell to $212,300 in March from $234,100 a month earlier. Compared with the same month last year, the median price is up 1.3 percent.

The number of new homes for sale fell to 433,000 from 437,000 in February. The median number of months those homes have been for sale fell to 3.6 months in March, the lowest since August 2003, from 4.3.

Mortgage Rates

``The purchase market is firm but it just seems the houses are staying on the market a little bit longer than they were this time last year,' Bob Moulton, president of Americana Mortgage Group Inc. in Manhasset, New York, said. ``And I'm seeing sellers staying firm on their prices.'

The average rate on a 30-year fixed mortgage was 5.9 percent in March, according to Freddie Mac, up from 5.63 percent in February. The rate fell to a 40-year low of 5.21 percent in June 2003. They've fallen every week this month, which may support new home sales in April, said Frank Nothaft, chief economist at Freddie Mac.

One reason ``we're not seeing yields go up as much is people have faith that the Fed will keep inflation under control,' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, in an interview.

Federal Reserve

Freddie Mac said April 6 that mortgage rates will average 6.2 percent this year. Forecasts for higher mortgage rates are based on expectations Federal Reserve policy makers will keep raising the benchmark interest rate this year to keep a lid on inflation.

Economists expect the Fed to raise its rate to 3 percent, from 2.75 percent, next week at the Fed's Open Market Committee meeting. It would be the eighth increase in eight meetings.

New home sales account for about 15 percent of the residential real estate market. Existing home sales make up the rest. Sales of previously-owned homes rose 1 percent in March to a 6.89 million rate, the National Association of Realtors said yesterday.

Housing construction fell a larger-than-expected 17.6 percent in March from a month earlier, when the pace of building reached a 21-year high, the Commerce Department said on April 19. The decline for the month probably was exaggerated, economists including Elisabeth Denison said.

February

``We had a very strong February,' Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein in New York, said. ``So a little moderation was expected for March.'

Snowstorms and high winds struck New York state and the New England region in early March, which may have depressed housing starts there.

``It will still be a wonderful year for our industry,' Donald Tomnitz, chief executive of D.R. Horton Inc., said in an interview on April 19.

D.R. Horton, the second-largest U.S. homebuilder by stock market value, said fiscal second-quarter earnings increased 56 percent and revenue climbed 23 percent, helped by higher demand and increased prices. The company, based in Fort Worth, Texas, sold 10,601 homes in the three months ended March 31, 7.9 percent more than a year earlier.


To contact the reporter on this story:
Courtney Schlisserman in Washington [e-mail]


LINK: http://quote.bloomberg.com/apps/news?pid=10000006&sid=avSdGcW.JicA&refer=home