Washington, DC, Apr. 28--Sales of new homes rose 7.3% in March, the biggest gain in seven months, as continued low mortgage rates and better weather helped offset two consecutive months of falling sales, according to the Commerce Department.
The gain pushed sales of new single family homes to a seasonally adjusted annual rate of 1.01 million in March as the housing sector continued to be the standout performer of the economy.
The sales increase was far better than analysts had been predicting. Additionally, the government revised the February performance to show that sales had only slipped 3.3% that month, not the 8.1% drop originally reported. Sales during February had been hurt by unusually severe winter snowstorms that blanketed large parts of the country.
The news was not quite as positive for sales of existing homes. According to the National Association of Realtors, sales of previously owned homes dropped 5.6% in March, the second monthly decline and the biggest in nearly a year. But even with the decline, the annual rate of sales was a solid 5.53 million homes, down from what analysts saw as unsustainably high rates in January and February.
"Existing home sales are down but not out," said Joel Naroff, head of a Holland, Pennsylvania, consulting firm. "The selling pace is still strong and it is unrealistic to expect that records could continue to be set."
Sales of both new and existing homes hit record highs last year and economists believe they will remain strong in 2003, due to continued low mortgage rates.
Freddie Mac, the nation's second largest purchaser of mortgages, said that 30 year fixed rate mortgages averaged 5.79% for the current week, the second straight weekly decline. That rate is very close to the all time low record in the Freddie Mac series of 5.61% set in mid-March, just before the start of the Iraq war. Other mortgage series show that current rates are the lowest since the early 60s.
The Commerce Department's survey of new home sales showed that the 7.3% increase in March was the biggest monthly gain since a 9.3% rise last August.
By region of the country, sales of new homes were the strongest in the Northeast, where the sales pace nearly doubled from February, a month when the region was hit by a severe snowstorm. Sales in March came in at an annual rate of 104,000 homes, up 82.5% from a rate of 57,000 in February.
New home sales were also strong in the South, rising 15.9% to an annual rate of 503,000 units. The increase was more modest in the West, where sales edged up 0.4% to an annual rate of 271,000 units.
The only region of the country where new home sales declined last month was the Midwest, which suffered a 26.4% drop to an annual rate of 134,000 units.
The 5.6% drop in existing home sales reflected declines in all parts of the country. Existing home sales fell 7.4% in the Northeast to an annual rate of 630,000 units and were down 7% in the West to an annual rate of 1.46 million units.
The Midwest experienced a smaller decline of 5.4% in March to an annual rate of 1.22 million units, while sales in the South fell 4.3% to an annual rate of 2.22 million units.
The drop in sales of existing homes did not keep the average sales price from rising. The average sales price for an existing home sold in March was $206,100, up from $202,700 in February.
The average price of a new home sold in March rose as well, climbing to $229,900, up from $225,700 in February.
