New-home sales surge 27%
Boosted by a soon-to-expire tax break, low mortgage rates and favorable weather, sales of new homes surged 27% in March to a seasonally adjusted annual rate of 411,000 after hitting a record low in February. It was the largest percentage gain in sales since April 1963, the government said. It was the highest sales pace since July, and much stronger than the 335,000 expected by economists.
Sales are up 24% compared with March 2009, but are down 70% from the peak in 2005. The government says it can take up to five months to establish a statistically significant trend in sales. Over the past five months, sales have been on a 358,000 seasonally adjusted annual pace, up from 355,000 in the five-month interval through February and 356,000 in March 2009. It's the first time since January 2006 that the five-month average was higher than a year earlier.
Sales of new homes had fallen four months in a row before March's surprising boom. A federal tax credit for home buyers that expires soon seemed to have little impact on sales until March.
In order to qualify for the credit, a buyer must sign a sales contract before April 30, and must close before June 30. New-home sales are recorded at the time of the contract signing, not the closing, so April's sales figures would be the last to show any impact from the subsidy.
"We expect a further sharp rise in April sales then a sharp, though temporary, drop in May," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. "After that, much depends on whether Congress extends the tax break; we expect it will."
Policy makers and investors will be watching the housing data closely over the next few months to see if the market can continue March's gains even after the tax credit expires and federal support for low mortgage rates subsides
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