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Sales of new homes rocketed up 27 percent in March

By Dina ElBoghdady
Washington Post Staff Writer
Saturday, April 24, 2010; A10

Sales of newly built homes shot up 27 percent in March -- the largest monthly gain in nearly five decades -- as mild weather and a lucrative tax credit pumped up demand for homes in all four regions of the country, according to federal data released Friday.

The Commerce Department reported that new-home sales jumped to a seasonally adjusted annual rate of 411,000, reversing February's record low and far exceeding the expectations of many experts who track the industry.

"We needed a grand slam . . . and we got it," Patrick Newport, an economist at IHS Global Insight, wrote in a note to clients.

Sales are up nearly 24 percent from March 2009, although they remain far below the peak in mid-2005.

Economists disagree on whether the sales momentum can be sustained, especially after the tax credit expires. But many economists say that some buyers who were deterred by the storms that gripped parts of the country in February clearly were rushing to beat the tax credit deadline.

To receive the credit -- $8,000 for some first-time buyers and $6,500 for certain repeat buyers purchasing a main residence -- buyers have to sign a contract by April 30 and complete the purchase by July 30.

David Crowe, chief economist at the National Association of Home Builders, said he expects new-home sales to plateau after this month, although he thinks the dramatic new-home sales declines of the past are over. The government's new-home sales figures capture contracts signed, not completed purchases.

"I'm expecting that the firming of house prices, continued low mortgage interest rates and an improving economy will be the momentum that carries us beyond the end of the tax credit," Crowe said.

The March sales gains were led by a 43.5 percent increase in the South, which includes the Washington region, and a 35.7 percent increase in the Northeast. Sales rose 5.7 percent in the West and 4.3 percent in the Midwest.

Meanwhile, the supply of new homes for sale is shrinking. The inventory dropped to 228,000 from 233,000 in February. At the current sales pace, it would take 6.7 months to sell these homes.

The median price of a new home fell 3.4 percent to $214,000 from $221,600 in February -- but it is up more than 4 percent from March 2009.

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