Sales of new homes in the U.S. went up by 1.5 percent in March at an annual seasonally adjusted rate of 417,000 homes. The reason for the modest growth has been attributed to record-low mortgage rates.
According to a report released by U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau, regional new home sales reflected a mixed pattern in March. The Northeast and Southern regions posted double-digit increases with 20.6 and 19.4 percent gains respectively, while the Western and Mid-western areas showed a 12.1 and 20.9 percent slump in sales, respectively. However, on the whole, sales in March are up 18.5 percent from the figures of the same in 2012.
"This is the second-best sales number we've seen since early 2010, and a good sign of the continued, gradual headway that our industry is making toward recovery as more buyers jump off the fence in time to take advantage of today's low interest rates and prices," Rick Judson, chairman of the National Association of Home Builders (NAHB), said in a statement.
The report also said that new home buying activity rose due to record low mortgage rates. The average rate for a 30-year fixed mortgage dropped to 3.41 percent in April, falling for the third straight week. This has also helped boost economic recovery. However, the Federal Reserve said that tight supply was only allowing a modest growth.
The constrained supply is spurring an increase in home prices as well.
According to the HUD and Census Bureau report, median prices of new homes were up 3 percent from a year earlier. Analysts at Barclays Plc are also forecasting a 10 percent hike in home prices in the coming few months, reports Bloomberg.
However, Industry experts believe that the subdued supply and price rises will ease in the coming months as construction of new homes is on the rise. In an early April report by McGraw Hill Construction, it was found that new construction starts in March spiked up 8 percent.
"There is momentum in the housing market, in that inventories are lean, prices are picking up, and people are trying to buy, which is fueling the recovery. You're seeing spillover in the housing market from broader economic improvement," Daniel Silver, an economist at JPMorgan Chase & Co., said to Bloomberg.
