New Home Sales Continue to Rise

March Growth Follows Best Year Ever, Gains in February

Sales of new homes in the United States increased to the highest level on record in March, the Commerce Department said yesterday.

Purchases rose 12.2 percent to a 1.431 million annual rate in March following February's 1.275 million pace, a rate that itself was faster than first estimated. The March pace exceeded even the highest forecast in a Bloomberg News survey of economists.

Sales so far this year have averaged a 1.295 million rate, compared with last year's record 1.2 million. Mortgage rates within a percentage point of a four-decade low and job and income gains are encouraging buyers, helping power the economy.

"Of course we all expect it to slow from the record of 2004, but to call it the end of the housing boom would be wrong," said Ellen Beeson, an economist at Bank of Tokyo-Mitsubishi Ltd. in New York. "Housing remains one of the best investments, especially with mortgage rates remaining low."

New home sales account for about 15 percent of the residential real estate market. Existing home sales make up the rest. Sales of previously owned homes rose 1 percent in March, to a 6.89 million rate, the National Association of Realtors said yesterday.

Economists forecast new home sales would decline to a 1.19-million-unit rate after February's previously reported 1.226 million pace, according to the median of 62 estimates in a Bloomberg survey. Projections ranged from a 1.1 million sales rate to 1.28 million.

Sales so far this year are exceeding industry forecasts. About 1.151 million homes will be sold this year, second only to the record 1.2 million bought in 2004, according to an April 5 forecast by the National Association of Home Builders. The homeownership rate was 69.1 percent in the first quarter, close to the 69.2 percent rate of the previous three months, which matched an all-time high, the government said on Monday.

Residential investment contributed 0.19 percentage point to the 3.8 percent rise in gross domestic product in the fourth quarter. While that was more than the previous three months, it was less than the 0.86 percentage-point increase in the second quarter.

Sales rose in three of four regions. They increased 21.9 percent in the Midwest, to a 217,000 annual rate; 13.8 percent in the South, to a record 733,000; and 9.9 percent in the West, to 399,000. They fell 8.9 percent in the Northeast, to 82,000; snowstorms and high winds struck New York state and New England in early March, which may have depressed housing starts.

The median price fell to $212,300 in March from $234,100 one month earlier. Compared with the same month last year, the median price is up 1.3 percent.

The number of new homes for sale fell to 433,000 from 437,000 in February. The median number of months those homes have been for sale fell to 3.6 months in March, the lowest since August 2003, from 4.3.

The average rate on a 30-year fixed mortgage was 5.9 percent in March, according to Freddie Mac, up from 5.63 percent in February. The rate fell to a 40-year low of 5.21 percent in June 2003. It has fallen every week this month, which may support new home sales in April, said Frank Nothaft, chief economist at Freddie Mac.

Bloomberg staff writers Victor Epstein and Joe Richter in Washington and Brian Sullivan in New York contributed to this report.