New home sales unexpectedly rise to highest level since July

Purchases of new homes unexpectedly increased in March to an eight-month high, indicating housing demand remained strong at the start of the spring buying season, Commerce Department data showed Tuesday.

Single-family home sales increased 5.8% to a 621,000 annualized pace (the median forecast called for a 584,000 rate). The February reading was revised to a 587,000 pace from a previously estimated 592,000.

The median sale price of a new house rose 1.2% from March 2016 to $315,100. The supply of homes shrank to 5.2 months from 5.4 months; there were 268,000 new houses on the market at the end of March.

Steady job growth and improving wages are continuing to drive demand, building on last year's new home sales that were the strongest since 2007. While mortgage costs remain above pre-election levels, they're becoming less of a curb on the market, with the average 30-year fixed rate falling last week to the lowest since November. Still, lean inventories and rising prices may restrain any gains.

Rise in demand was led by a 16.7% gain in the West, which had the fastest sales pace since 2007; the South and Northeast also saw gains, while purchases slowed in Midwest.

Bloomberg News