Newspaper article THE JOURNAL RECORD

New Home Sales Surprise Analysts with April Surge

Newspaper article THE JOURNAL RECORD

New Home Sales Surprise Analysts with April Surge

Article excerpt

WASHINGTON (Bloomberg) -- U.S. new home sales unexpectedly rose in April to the second-highest level ever, driving prices to a record high and giving Federal Reserve policy-makers another reason to consider raising interest rates.

Sales surged 9.2 percent in April to a seasonally adjusted annual rate of 978,000 units, the Commerce Department said Wednesday. That topped analysts' forecast for a 1.5 percent decline and followed an 0.8 percent decrease in March.

Rising mortgage rates contributed to the April increase, builders and economists said. "People who have been sitting on the fence trying to make up their mind, come out and buy," said Robert I. Toll, chairman and chief executive officer at Toll Brothers, the nation's No. 1 luxury home builder. Average rates for 30-year fixed-rate mortgages rose to 7.23 percent last week, up from about 6.8 percent at the start of the year and a three-decade low of 6.49 percent last October. The median price of new homes rose 3 percent in April to a record $159,500 from $154,800 in March, Commerce Department figures showed. That's 7.8 percent higher than a year earlier. Rising prices don't necessarily mean buyers are being priced out of the market. With a 7.23 percent mortgage on a $159,500 home, a buyer would pay $1,086 a month in principal and interest costs, compared with a $1,007 payment at 6.49 percent. The rise in home sales "will be one more piece of the puzzle that says to the Fed it's appropriate to tighten," said Diane Swonk, deputy chief economist at Bank One in Chicago. "The strong home sales keep generating additional spending, and this just puts that much more in the pipeline." Just last week, Greenspan indicated policy-makers are watching the housing boom's effect on the rest of the economy. "The home sales market is a critical factor of what's going on in retail sales," he said in a speech to the National Retail Federation. April's sales level was second only to November's record pace of 958,000 homes. So far this year, home sales have averaged an annual rate of 921,000. If sustained, that would exceed last year's record 886,000 homes sold. …

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