WASHINGTON – Sales of new homes shot up 12.2 percent in March to a record high as the nation's housing market continued to soar despite rising mortgage rates.
The Commerce Department (search) said Tuesday that new single-family homes were sold at a seasonally adjusted annual rate of 1.43 million units in March, confounding the consensus forecast of a small decline in sales in March, a month when mortgage rates had been inching higher.
Instead, sales climbed to an all-time high, surpassing the old mark of 1.3 million units at an annual rate last October. Sales of both new and existing homes have set new records for four straight years, but analysts are expecting demand to cool off a bit in 2005 as mortgage rates climbed higher.
The big jump in sales was not accompanied by a rise in prices. The median price of a new home sold in March actually declined to $212,300, a 9.3 percent drop from the February level of $234,000.
Sales were strong in all parts of the country except the Northeast, where they dropped by 8.2 percent to an annual rate of 82,000 units. The biggest increase occurred in the Midwest, a gain of 21.9 percent to an annual rate of 217,000 units, the strongest pace since last December.
Sales were up 13.8 percent in the South to a record annual rate for that region of 733,000 units. Sales in the West climbed by 9.9 percent to an annual rate of 399,000, the strongest pace since last October.
Besides the big rise in sales of new homes, economists were also surprised by a 1 percent increase in sales of existing homes, which rose in March to a seasonally adjusted annual rate of 6.82 million units, the third-highest pace on record. Before the release of Monday's report by the National Association of Realtors (search), economists had been predicting a slight decline in sales of existing homes because of the higher interest rates.
Analysts, however, said the rise in mortgage rates so far has evidently not been enough to dampen buyers' enthusiasm. And some of the increase in March has been retraced with rates falling for the past three weeks to stand at 5.8 percent for a 30-year mortgage (search), according to a weekly survey by mortgage giant Freddie Mac.
The one negative for home sales in March was a sharp 17.6 percent drop in construction activity on new homes and apartments last month, the biggest drop in 14 years. But economists blamed much of that decline on weather factors.