New-Home Sales Rise Unexpectedly in April

WASHINGTON — New-home sales reached their second-highest level on record in April as buyers, trying to stay ahead of rising mortgage rates, rushed to close deals.

Sales of new single-family homes jumped 9.2% in April, after four straight months of declines, the Commerce Department said Wednesday.

The surge pushed up sales of new homes to a seasonally adjusted annual rate of 978,000 units in April, the second-highest level on record. The all-time high was a sales rate of 985,000 units set in November.

Analysts had expected a fifth straight monthly decline in home sales in April, contending that rising mortgage rates were cooling off what had been a red-hot housing market. But the report showed strong sales in every region of the country except the West.

The West, which had seen sales jump 22.9% in the previous month, suffered a drop of 5.3% in April.

“It may be the cooling-off pattern that we thought was developing hasn’t really developed, and it may . . . take the higher rates to hold for a little bit to truly cool this market down,” said David Seiders, an economist with the National Assn. of Home Builders.

Sales surged 33.5% in the Midwest, 17.1% in the Northeast and 7.5% in the South.

Analysts said Wednesday that Americans, buoyed by a healthy economy but concerned about the prospects of higher mortgage rates, are buying homes now to take advantage of existing rates, which have been creeping up.

“No doubt some of the strength in sales . . . is due to buyers locking in before mortgage rates go higher,” said David Orr, economist with First Union.

The overall growth in demand was accompanied by a rise in prices. The median price of all new homes sold last month climbed 3% to a record $159,500. The median is the midpoint where half the homes sold for more and half for less. The average sales price rose 3.7% to $193,100, also a record.

Some analysts believe that the rise in home prices, along with the jump in sales, increase the odds that the Federal Reserve will raise interest rates to slow economic activity to a more sustainable pace and relieve rising price pressures.

The Fed next meets on interest rates June 29-30. At their meeting in May, Fed officials changed their policy stance to indicate a bias toward a rate increase, a move that has raised worries that a rate increase could be imminent.

Federal Reserve Chairman Alan Greenspan said Wednesday that he was concerned about rising protectionist pressures in the United States, but he gave no hint in his speech to a Boston business audience about the Fed’s current thinking on the economy and inflation.

Some analysts believe that a 3.3% decline in existing-homes sales in April and a sharp 2.4% decrease in construction spending--including single-family homes--for the same month signal a slowdown in housing activity.

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New-Home Sales

Seasonally adjusted annual rate, in thousands of units:

April: 978,000 units

Source: Commerce Department