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New Home Sales Up In March

A government report issued Tuesday provided some much-needed optimism for the housing market by showing that sales of single-family homes rose unexpectedly in April and prices increased, as well.  The Commerce Department said that sales rose 7.3 percent in the month to a seasonally adjusted annual pace of 323,000, the highest level since December.  It was the second straight month of gains in sales, as March's figure was revised upward to a 301,000 unit pace.

Economists taking part in a recent Reuters poll had expected sales to remain unchanged at a pace of 300,000.  Gains were seen in all four regions of the U.S., with the West seeing a 15.1 percent increase.  Sales for the month are still down from last April, however, by 23.1 percent.  While the report does offer some optimism on the long-struggling U.S. housing market, most economists are not ready to say that the market has reached a bottom.  Data ranging from industrial production and retail sales have suggested the economy is still struggling to gain momentum.

Manufacturing activity has slowed this month after seven straight months of growth, according to a report released earlier Tuesday.  Economists are anticipating a report on Thursday to show that the economy grew at a 2.1 annual pace in the first three months of the year, up from the 1.8 percent pace expected last month.

There still remains a tremendous oversupply of homes on the market, and foreclosures are expected to increase the inventory even further, curbing demand for new homes.  This will further depress new home construction, typically a vital cog in the economy's recovery following a recession.  It is estimated that every new home built creates three new jobs for a year and generates at least $90,000 in taxes.  There were only 175,000 new homes listed for sale in April, the lowest figure on record and 2.8 percent below the number available in March.

Data reported last week showed that sales of previously owned homes dipped in April and construction of new homes fell sharply.  The Commerce Department said that the median price for a new home rose 1.6 percent last month to $217,900, which is 4.6 percent on a year-to-year basis.  At the pace of sales in April, the supply of new homes on the market was 6.5 months worth, the lowest since April of last year, and down from 7.2 months worth in March.