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Home sales soar, but for how long?
Sales jumped 8.9% in March, topping forecasts, but economists wonder about rate rise impact.
April 26, 2004: 4:22 PM EDT

NEW YORK (CNN/Money) - New home sales posted their biggest gain in nine months in March, the government said Monday, but the recent rise in interest rates makes it unclear how much longer the sales boom will last.

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The Commerce Department said sales jumped 8.9 percent last month to an annual rate of 1.23 million, up from a revised 1.13 million rate in February. Economists surveyed by Briefing.com expected to see an annual rate of 1.17 million.

It was the highest sales rate since September, and the biggest monthly gain since last June, when mortgage interest rates fell to the lowest levels since the early 1960s.

Mortgage interest rates were near record lows in mid-March, but have started to climb sharply over the last month. Mortgage financier Freddie Mac reported that the average rate for a 30-year, fixed-rate mortgage stood at 5.94 percent for the week ended April 22, up from 5.38 percent in the week ended March 18.

"What happened in March, if you were thinking about buying a home this spring and you thought rates were going to rise, you may well have rushed into the market," said Wachovia Securities economist Mark Vitner. "The weather cooperated as well, making it easy for folks to get out and shop, particularly in the South."

Vitner said it's possible that some future months' sales could be negatively affected by the strong March sales.

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Other government reports showing rising employment and inflation have pushed up rates in the bond market and led investors to believe that the Federal Reserve will start raising interest rates later this year, perhaps as early as the summer.

Still, the supply of new homes on the market is as tight as at any point since August -- about a 3.7 month supply, according to the government report.

A stronger employment outlook could support home buying even with the increases in mortgage rates.

"The impact of stronger job growth more than overcomes the impact of higher mortgage rates," said Vitner. "It doesn't mean we'll have a month like March every month. But home sales should remain strong even with mortgage rates about a percentage point above the low point."  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.