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New home sales sizzle
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June 2, 1998: 11:07 a.m. ET
Sales surged 5.2% in April to record; Leading indicators index is robust
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NEW YORK (CNNfn) - Sales of new U.S. homes surged to record levels in April as low interest rates, rising incomes and a booming economy stoked demand in the housing market.
Sales of existing single-family homes rose 5.2 percent to an annualized rate of 888,000, a historical high, the Commerce Department said. Economists had expected a rate of 839,000.
The largest increase was in the South, where a sizzling housing market saw an 18.1 percent jump in new-home sales.
In an important gauge of future trends in the economy, the Index of Leading Economic Indicators rose 0.1 percent in April, the fourth consecutive increase, though slower than March's 0.2 percent gain, the Conference Board said Tuesday.
The 30-year Treasury bond rose 7/32 in price on the news, pushing the yield down to 5.79 percent.
Economists hailed the housing figures, since housing sales have a trickle down effect across the economy as homebuyers stock up on goods to fill the new homes.
"It's the biggest market we have, because people don't live in empty houses," said Delos Smith, an economist with the Conference Board.
Smith noted that a labor shortage means that homes weren't being built as quickly as demand would warrant. "Housing starts would be much much higher if they could find the people to build the homes," he said.
Though several of the 10 leading economic indicators declined, the Conference Board said none of the falling indexes are omens of "dark clouds" on the horizon.
The index of coincident indicators, a barometer of present economic conditions, rose 0.2 percent in April after rising 0.3 percent in March. The index of lagging indicators, showing past economic performance, fell 0.3 percent in April following March's revised decline of 0.3 percent.
Economists had predicted the leading index, which forecasts economic conditions six to 12 months down the road, remaining unchanged.
Changes in the indicators are used to forecast shifts in the business cycle.
In home sales, the Commerce Department revised its March sales pace upward to 844,000 from the previously reported 828,000.
April new home sales fell 3.1 percent in the Northeast, 9.2 percent in the Midwest and 0.5 percent in the west. But those losses were more than offset by the surge in homebuilding in the South.
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