New home sales posted the biggest jump in 13 years in March but sales got a boost as builders cut prices to cope with higher mortgage rates and a growing backlog of houses on the market.
The government reported new homes sold at an annual rate of 1.21 million homes in March, up 13.8 percent from a revised 1.07 million pace in February. That easily topped forecasts for a 1.1 million pace from economists surveyed by Briefing.com.
The jump, the biggest since a 16 percent rise in April 1993, came even as mortgage rates hit an average 6.32 percent last month for 30-year fixed-rate loans, according to Freddie Mac, up from 6.25 percent in February. The rate was the second-highest monthly rate seen since 2002. Rates have risen even further since, climbing to 6.53 in the most recent weekly survey.
With rising mortgage rates driving up the cost of financing home purchases, most economists have been looking for the real estate market to cool off in 2006 after several years of record sales.
But the strong report Wednesday follows another surprising strong showing -- existing home sales also showed an unexpected increase last month, a real estate group reported Tuesday.
The new home sales, while a fraction of the overall real estate market, are more closely watched since they're more of a leading indicator of market strength. Existing home sales are recorded at the time of closing, typically a month or two after a purchase agreement, while new home sales are tracked when a contract is signed.
The report did show a decline in the median and average home price compared to February, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.
About one builder in five has reported a jump in cancellations of new home orders, and Wednesday's report showed 553,000 new homes for sale in March, up 25 percent from a year earlier.
The average price fell 7.1 percent to $279,100, after topping $300,000 for the first time in February's revised figures. The median price, which reflects the point at which half the homes sell for more and half sell for less, fell 6.5 percent to $224,200.
And while month-to-month declines in home prices are not unusual, the report also showed a 2.2 percent decline in median prices from a year earlier, and a 3.6 percent fall in average prices over that time.