New home sales jump 14.8 percent in April
Wednesday, May 26, 2010; 11:39 AM
New homes sales surged last month as home buyers rushed to take advantage of a government tax credit that has helped lift the housing market, according to government data released Wednesday.
The sales of new single-family homes rose 14.8 percent in April compared with the previous month to a seasonally adjusted annual rate of 504,000, according to Commerce Department data. It was up 47.8 percent compared to the same period a year ago.
Sales rebounded the most in the Midwest, 31.6 percent. They rose 10.8 percent in the South, which includes the Washington region, and increased 21.7 percent in the West. Sales were flat in the Northeast.
That follows an industry report this week that sales of existing homes, which make up the majority of the market, jumped 7.6 percent in April.
Economists who follow the industry say the reports reflect the impact of low mortgage rates and a $8,000 tax credit available to some first-time home buyers and a $6,500 tax credit available to some repeat homeowners who buy a new primary residence. To qualify for the tax credit, a buyer must have entered into a contract by April 30 and complete the transaction by June 30.
But now that the tax credit has expired, many economists are expecting to see sales activity slow. The tax credit probably spurred some people planning to buy a house to purchase them earlier, analysts say.
"Overall, this surge in sales may give the economy a short-term boost, not least as households furnish their new homes," Paul Dales, an economist for Capital Economics, said in a research note. "But it will be only a matter of months before a double-dip in the housing market starts to act as a modest drag on economic activity."
The impact of the expiration of the tax credit is likely to be muted by low mortgage rates and improvements in the economy, said David Crowe, chief economist for the National Association of Home Builders. "We stole demand from the future and we will see a plateau [in sales] in May and June," he said.