Home Sales Unexpectedly Rise in April

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The New York Sun

Defying forecasts of an imminent slowdown, sales of new homes shot up in April to the fastest sales pace this year. But prices were up only slightly, and the backlog of unsold homes hit a new record.

The Commerce Department reported yesterday that sales of new single-family homes increased by 4.9% last month to a seasonally adjusted annual rate of 1.198 million units, the highest rate since last December.

Economists, who had been forecasting a sales decline in April, said the increase had been skewed by the fact that the government lowered sales activity significantly in prior months.

Also, they noted that the number of unsold homes remaining on the market at the end of April rose to the highest level on record, an overhang that they predicted would depress prices going forward.

The median price of a new home sold in April was $238,500, up just 0.95 from a year ago, far below the double-digit price gains sellers were enjoying last year at the peak of the housing boom.

“Housing is holding up better than we had thought given how much mortgage rates have gone up, but we still expect it to weaken as the year goes forward,” the chief economist at Standard & Poor’s in New York, David Wyss, said.

Mr. Wyss said he expected home sales would drop by 10% this year and that construction of new homes and apartments would be down by about 8%.

On Wall Street, the Dow Jones industrial average finished an erratic session posting a modest gain of 18.97 points to close at 11,117.32.

The housing slowdown is coming after five years in which sales of both new and existing homes hit consecutive sales records as buyers enjoyed the lowest mortgage rates in four decades.

The National Association of Realtors is scheduled to report on existing home sales, which represent four-fifths of the total home market, today with expectations of a 2.5% decline.

The Federal Reserve has been raising short-term interest rates for nearly two years and those increases are finally starting to trigger a sustained rise in long-term borrowing costs. The rate on 30-year mortgages hit a nearly four-year high of 6.60% last week.


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