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NEW YORK (CNN/Money) -
New home sales rose to a record annual pace in April, the government said Wednesday, as low mortgage interest rates produced the second sign of strength in the real estate market this week.
The Census Bureau reported that new homes sold at an annual pace of 1.32 million homes in April, up 0.2 percent from a revised 1.31 million rate in March. The March sales pace was originally reported to be 1.43 million. Economists surveyed by Briefing.com had forecast a 1.33 million sales pace in April.
The Census Bureau revised seasonally adjusted estimates for new home sales going back to January 2003, which caused the large adjustment in the March number.
But even the revised March figure would have been a record sales pace before the April result edged past it. Only April, March and October 2004 have topped the 1.3 million sales pace for new homes. No other month on record produced a sales pace above 1.26 million.
The report comes the day after a report on sales of previously owned homes in April also showed a record sales pace. The new home sales report, while representing a smaller segment of the real estate market, is considered a more important indicator.
The new home sales figures are based on data collected when sales agreements are reached. The existing home sales figures are based on sales that are closed. Since closings generally take place a month or two after a sale contract is reached, the new home sales is more of a current indicator on market strength.
Mortgage finance firm Freddie Mac put the average 30-year fixed-rate mortgage at 5.86 percent for April, down slightly from March. And the low rates haven't ended, despite steady increases in short-term interest rates by the Federal Reserve.
Freddie Mac's weekly survey showed the 30-year loan rate at 5.71 percent last week.
New home sales are also an important indicator for employment in the housing construction industry, and buyers of new homes typically buy more furnishings and appliances than those moving into previously-owned homes.
Sale prices for new homes also rose in the latest report, although not to record levels. The median price rose to $230,800 from $217,500 in March, but that was still short of February's $235,800 level. The median is the typical home sale at which half the new homes sold cost less and half cost more.
Unlike the sales prices of existing homes, which saw median prices up about 15 percent from year-earlier levels, the typical April new home sales price is up a bit less than 4 percent from April 2004.
The average new home sale price was unchanged at $283,500. That suggests that there was greater strength in the lower end of the housing market than in the upper end.
"There may have been a little over-enthusiasm trying to serve the high end previously, but we haven't seen any evidence the high end is having problems," said Michael Carliner, an economist with the National Association of Home Builders. "We have also seen some national builders trying to buy market share by pricing more aggressively."
Mark Vitner, senior economist with Wachovia Securities, said a drop in the cost of some building materials is helping to keep new home prices in check. And he said that about one in five new homes are being built in three states - Texas, Georgia and North Carolina, and the relatively easy availability of land in those markets is keeping overall national price gains under control. In more developed markets such as the Northeast and Southern California, where land is at more of a premium, there's a lot less home building going on.
Vitner is one of the economists who does not believe there is a national housing market bubble, despite the strong sales numbers recently.
"We may be leveling off at this 1.3 million unit pace, but I don't think we're going to see this turn down any time soon. We've got strong jobs number and very low mortgage rates coming into the summer sales season," he said.
But Vitner does agree with those who worry about a real estate bubble that these strong levels can't continue indefinitely, especially with economic growth projected to slow later this year, and the Federal Reserve and other regulators looking at tighter lending standards for mortgage loans.
"If the economy slows and at the same time we have some tighter credit controls, we could curb some of speculation taking place in the market," he said.
For more on the real estate market and what it means for you, click here.
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