New Home Sales Show Biggest Rise in Four Years

American new home sales rose by the most in four years and prices jumped to a record in February as buyers raced to beat rising mortgage rates. Orders for big-ticket goods also increased during the month.

Home purchases rose 9.4% to a 1.226 million annual rate and the median price increased 9.6%, the biggest gain since February 1993, to $230,700, the Commerce Department said yesterday in Washington.

Durable goods orders increased 0.3%, the third rise in four months, aided by a rebound in aircraft demand, the department also said.

Initial jobless claims unexpectedly rose by 3,000 to 324,000 last week, while remaining at a level that suggests the world's largest economy added jobs this month, Labor Department data showed yesterday. The day's reports show the economy is growing and that job market is still strengthening, economists said.

"The economy is improving, job growth is improving, and we continue to see a strong housing market," said the chief economist at Quicken Loans, Bob Walters, in an interview. Livonia, Mich.- based Quicken offers residential mortgages and home-equity loans through its Web site.

The February price increase, which reflected a jump in the number of homes costing $200,000 or more, followed an 8.6% slump in January that was the largest since September 1981.

The Federal Reserve this week raised its overnight bank-lending rate for a seventh straight time since June and said there were signs inflation is picking up, contributing to higher borrowing costs for consumers. This week's average 30-year fixed mortgage rate rose to 6.01%, the highest since last week in July, from 5.95%, Freddie Mac said yesterday. The low was 5.21% in June 2003, according to the no. 2 buyer of mortgages.

"Thirty-year mortgage rates have been slow to rise, but they're making up for it now," said the chief economist at the Bank of Hawaii, Paul Brewbaker. "That's where this 'last-chance sale ends tomorrow' mentality among buyers is coming from."

U.S. 10-year Treasuries headed for their third weekly decline in four yesterday on concern about faster inflation. The 4% note maturing in February 2015 fell 1/16 point, pushing the yield up 1 basis point to 4.59% at 1:46 p.m. in New York. The yield is up from 3.99% on Feb. 9.

"From Alan Greenspan on down, everyone is running an advertisement for the homebuilding industry that says prices are going up, so you better buy now," said the chief executive of Toll Brothers, the largest American builder of luxury homes, Robert Toll, in an interview.

The increase in durable goods orders to $201 billion followed a 1.1% decline in January. Orders excluding transportation fell 0.2%, the first drop in three months, after a 0.9 percent gain in January that was bigger than previously reported, the Commerce Department said.

The drop in February's orders excluding transportation may be a belated response to the end of tax incentives designed to spur orders in 2004, economists said.

"We were due for a pause," said the chief economist at RBS Greenwich Capital in Greenwich, Conn., Stephen Stanley. "These figures are certainly not a cause for concern."

Because of revisions in January, the dollar value of orders was close to expectations of $202.2 billion for all durable goods and $147.5 billion for durables excluding transportation.

The American economy created 262,000 jobs in February, the most in four months. Employers probably added another 225,000 workers in March, according to the median estimate in a Bloomberg survey of economists before the government's April 1 report.

"Companies are generally becoming more confident despite the increase in energy costs and interest rates," said the chief economist at Banc of America Capital Management in St. Louis, Lynn Reaser. "Sales and orders remain strong and companies are even experiencing some increase in pricing power. All this is leading to increased hiring and a general easing in layoffs."

The less-volatile four-week moving average was 321,750, down 5.4% from a year ago, according to today's Labor Department report.

Today's durable goods report was aided by an increase in aircraft orders. Orders for transportation equipment, a volatile category, rose 1.6% after falling 6.3% in January. Bookings for commercial aircraft rose 32%, after decreasing by the same percentage in January.

Chicago-based Boeing Company, the world's second biggest maker of airplanes, behind Europe's Airbus SAS, said March 8 it received orders for 34 aircraft in February, up from 20 the previous month.

Bookings for non-defense capital goods excluding aircraft, an indication of future business investment, fell 2.1% last month after rising 4.4% in January, a bigger increase than previously reported. Shipments of such goods, which the government uses to calculate quarterly gross domestic product, fell 2.6% after rising 3.6%.

Even with the declines in February, orders for non-defense capital goods excluding aircraft were up 16% in the first two months of 2005 compared with a year earlier.

Bookings for motor vehicles and parts fell 1.2% after falling 4.5% in January.

Inventories relative to sales, a measure of how long supply can be expected to last at the current level of demand, stayed at a record low 1.3 months in January.