Sales of new homes surged by 8.9 percent in March, the largest monthly increase in nine months, as mortgage rates bottomed out before starting to ascend.
The increase pushed sales of new, single family houses to a record seasonally adjusted annual rate of 1.228 million last month. That was up from 1.128 in February, the Commerce Department reported Monday.
The monthly increase of 8.9 percent was the highest since June 2003.
By region, new home sales soared by 19.3 percent in the South, hitting a record rate of 613,000. But in the Northeast, sales plummeted by 24.3 percent to a rate of 78,000. The West posted an increase of 5.1 percent to a pace of 349,000, and in the Midwest, sales rose by 5 percent to a pace of 188,000.
Nationwide, the median sales price of a new home in March dropped to $201,400 from a revised $210,000 in February. The median price is the point at which half sell for more and half sell for less.
Last month's sales increases were powered by record-low mortgage interest rates, with 30-year, fixed rates falling to a record low for the year of 5.38 percent the week ending March 18.
Home buyers scrambled to take advantage of those low rates before they disappeared.
Increasing signs that the economy's recovery is gaining momentum, including a relatively good employment report for March, have pushed bond rates up, causing long-term mortgage rates also to rise.
Rates on 30-year, fixed rate mortgages have risen for five straight weeks, climbing to their highest level of the year last week. The average rate last week was 5.94 percent, according to mortgage giant Freddie Mac.
Fed Chairman Alan Greenspan told Congress last week that the recovery is solidly on track and that at some point short-term interest rates must rise to keep inflation in check. But he didn't say when that might happen.
Some economists think the Fed may push up short-term interest rates later this year. Others, however, don't believe higher rates will come until 2005.
