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April 23, 2019 11:45 AM, EDT

New-Home Sales Rise to 16-Month High

4.5% Increase Tops Estimates
Construction George Frey/Bloomberg News

Sales of new U.S. homes unexpectedly rose in March to a 16-month high, with a third straight increase that reflects a boost from lower borrowing costs.

Single-family home sales rose 4.5% to a 692,000 annualized pace that exceeded all estimates in Bloomberg’s survey, while February’s figure was revised down slightly, government data showed April 23. The median sales price decreased 9.7% from a year earlier to a two-year low of $302,700.

The surprisingly strong reading — the second-best pace of the economic expansion — suggests lower mortgage rates, rising wages and the Federal Reserve’s pause on borrowing costs are helping the housing market regain its footing after stumbling last year.

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Still, other March data have been less upbeat as existing home sales missed estimates and housing starts slumped to the slowest pace since May 2017. The number of properties sold for which construction hadn’t yet started grew to 200,000, the most since November 2017, indicating lower mortgage rates have lured more buyers.

A Mortgage Bankers Association report earlier this month showed applications for loans to buy homes rose to the highest level in almost nine years. New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.