New Home Sales 2nd Highest on Record

Washington, DC, March 24--New homes sales rose 9.4 percent in February to a seasonally adjusted annual rate of 1.226 million, according to the Commerce Department. The sales rate is the second highest rate ever, matching December's pace and just below October's record 1.304 million. Economists were expecting a small increase to about 1.14 million. The supply of new homes on the market rose to a record 444,000, representing a 4.4-month supply at the February sales pace. In January, the inventory had spiked to a 4.6-month supply. Home sales and new construction have remained very robust despite increases in mortgage rates. Sales of existing homes dipped slightly in February to a still-strong 6.79 million annual pace, a realtors group reported on Wednesday. But mortgage rates have risen sharply since February to around 6 percent. Economists for housing and real estate groups say they believe rising incomes and continued appreciation in home values will keep demand strong even as interest rates rise. Others worry that low interest rates and lack of other investment opportunities have fueled a bubble in housing, bringing in speculators to push demand - and prices - higher than justified by fundamentals. The government cautions that its housing data are particularly prone to sampling and other statistical errors. It can take six months to establish a new trend in home sales. In February, the six-month average sales rate was a record 1.210 million, up from 1.199 million in January. In February, sales rose in all four regions of the country. Sales in the South climbed 9 percent to a record 619,000 annual rate. Sales increased about 20 percent in the Northeast, 10 percent in the Midwest and about 7 percent in the West.