Breaking a four month string of declines, new home sales jumped 26.9% in March for the best improvement in a single month in forty-seven years. Sales were up in every region of the U.S. but were particularly strong in the South where sales of new homes increased by 43.5%. The report on new home sales followed closely on the heels of a stronger than expected report on existing home sales which showed a 6.8% increase in March. The seasonally adjusted annual rate of 5.35 million units reflected in the numbers represented a 16.1% increase over existing home sales in March of 2009. Analysts credit most of the surge in home sales to the first-time homebuyer tax credit as buyers rush to get in under the deadline.
Mortgage rates remain at historically low levels but have subject to increased market volatility of late with the benchmark thirty-year, fixed rate bounding between 5.125% and 5.375%. After touching 4% two weeks ago the yield on the ten-year Treasury note now stands at 3.76% which explains the quarter percent swing. While many are forecasting higher rates ahead, it is looking increasingly unlikely that we will not see a significant increase in rates in the next two quarters and possibly not until 2011. With the end of the homebuyer tax credit and other Federal stimulus measures drawing to an end, some economists point to a possible double-dip recession if employment growth and home sales cannot continue to improve on their own. Until the double-dipper theorists are proven wrong, I expect the Federal Reserve to keep interest rates extremely accommodative in the short-run.