Sales of new homes shot up in February more sharply than they have in four years, as buyers raced to snap up lower interest rates while they were still available. The price of new homes also spiked.
The Commerce Department reported yesterday that new, single-family home purchases rose 9.4 percent in February to a seasonally adjusted 1.23 million annual rate. That was the biggest one-month increase since December 2000. Sales rose in all parts of the country.
Rates on 30-year, fixed-rate mortgages averaged 5.57 percent the week ended Feb. 10 and have risen since.
(F. Carter Smith -- Bloomberg News)
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Metro Business: Coverage of Washington area businesses and the local economy.
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The median price of a new, single-family house -- with half selling for less and half for more -- increased 9.6 percent in February, to $230,700 nationally, according to the Commerce Department, marking the biggest gain since February 1993.
Economists, housing watchers and builders attributed the February spikes to several factors: low mortgage rates before a six-week climb, milder weather compared with January, and the start of the spring construction season, traditionally a busy time of year for home builders.
"Buyers were taking advantage of the low mortgage rates that we had in mid-February," said Frank Nothaft, chief economist of secondary mortgage giant Freddie Mac. "It's the 'bird in hand is worth two in the bush' psychology."
Rates on 30-year, fixed-rate mortgages averaged 5.57 percent the week ended Feb. 10, which marked an 11-month low. Since then, they have risen steadily, hitting an average of 6.01 percent this week, almost half a percentage point higher than last month, according to Freddie Mac data. That increase would add about $79 a month to the cost of a $250,000 mortgage.
"The prospect that rates will go higher later in the year has been a significant factor in getting people who might otherwise have delayed buying to jump in and commit now," said Michael Carliner, an economist at the National Association of Home Builders in Washington.
John Albrittain, a high-end custom home builder in Arlington, said that's what he has witnessed in the Washington area. "With interest rates going up, people are realizing that if they want to buy, they need to buy now. And with prices continuing to go up, they're seeing that if they don't buy now, it'll just cost more later," he said.
Carliner said weather also contributed to the sales increase. "The weather in February was much better than the weather in January in a lot of the country," Carliner said. "And new-home sales are very sensitive to the weather."
Existing-home sales, which are considered less affected by weather, slipped a slight 0.4 percent in February but remained above year-ago levels, according to the National Association of Realtors.
When the existing-home sales figures were released Wednesday, economists said the housing market looked as if it might be starting to settle down after several record-setting years. Most economists have predicted a gradual slowing in sales and price appreciation over the year, with a gradual rise in mortgage rates.
But the new-home sales figures released yesterday tempered the talk of a cool-down, at least temporarily.
"It's the start of the building season," said Jerry Howard, chief executive of the home builders association. The February new-home figures "show that there's still pent-up demand for new homes out there. It's not surprising to us at all."
