Washington, DC, April 26, 2006--New home sales unexpected increased by 13.8% in March to a seasonally adjusted annual rate of 1.213 million, the highest level of the year, according to a Commerce Department report.
The increase more than reversed the 10.9% decline in sales in February. It was far stronger than the mild increase to 1.10 million annualized that was expected by economists.
Combined with the small increase reported in existing home sales on Tuesday, the report shows the housing market was much stronger in March than anyone had reason to believe. Other housing market indicators, including mortgage applications, housing starts and builders' sentiment, are pointing to a softer housing market.
The strength in home sales, if it persists, could keep the economy growing faster than the Federal Reserve wants and could lead to higher interest rates than now expected.
New home sales are down 8.2% year-to-date.
The government cautions, however, that its housing data are subject to large sampling and other statistical errors. The margin of error is so large, in fact, that the government cannot say with confidence that sales rose at all in March.
It can take up to six months for a trend in sales to emerge. New home sales have averaged 1.22 million per month over the past six months, down from 1.23 million in February and 1.3 million in November.
The inventory of unsold homes on the market increased 2.8% to 550,000, representing a 5.5-month supply at the March sales pace, down from 6.3 months in February.
Median home prices fell 2.2% year-over-year to $224,200. It's the first time prices had fallen year-over-year since December 2003.
In March, sales rose 35.7% in the West, reversing the 30.3% drop in February.
Sales increased 6.9% in the South, 10.9% in the Midwest and 4.7% in the Northeast.
