NEW YORK (CNNMoney.com) - 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.

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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 mortgage rate was the second-highest for any month since 2002. Rates have risen further since, climbing to 6.53 percent 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 economist Bob Brusca of FAO Economics said last month's drop in new home prices is a sign that the market for new homes isn't nearly as strong as the jump in sales would suggest.

He noted that the report showed an unusual drop in prices from both February and a year earlier, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.

"New homes sales sprang back to life like a zombie in a cheap horror flick," Brusca said. "And like that zombie, housing really is dead. Don't let all that twitching fool you."

He said that many of the new homes sold in March were probably built in a stronger real estate market.

And unlike existing homes, where sellers can live until they get an acceptable price, "builders can't live in these houses unless they have a lot of family," he said. "By and large they must finance them at rising interest costs."

In fact, about one builder in five has reported a jump in cancellations of new home orders, according to a recent industry survey. And Wednesday's report showed that there were 553,000 new homes for sale in March, up 25 percent from a year earlier.

Meanwhile, average prices fell 7.1 percent from February to $279,100, after topping $300,000 for the first time in the February revised figures. The median price, which reflects the point at which half the homes sell for more and half sell for less, also fell 6.5 percent to $224,200.

And while month-to-month declines in home prices are not unusual, more significantly, prices also fell from a year earlier: a 2.2 percent decline in median prices and a 3.6 percent fall in average prices over that time.

Still, Wednesday's big jump in sales came after existing home sales also showed an unexpected increase last month in a report from the National Association of Realtors Tuesday.

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 conditions in the housing market.

Existing home sales are recorded at closing, typically a month or two after a purchase agreement, while new home sales are tracked based on when contracts are signed.

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