WASHINGTON — New home sales climbed 4% in April to the highest level in a year, the government said Tuesday, but analysts said rising interest rates would likely dampen sales this summer.
New single-family homes sold at a seasonally adjusted annual rate of 679,000 in April, the fastest pace since new homes sold at a rate of 728,000 in April, 1987, the Commerce and Housing and Urban Development departments said in a joint report.
It was the third consecutive increase, coming atop a 1.2% rise in March and an 11.4% jump in February.
"Overall, it's a very nice report. No question about it," said David Seiders, chief economist of the National Assn. of Home Builders. A survey of home builders showed sales remained strong in early May, he said.
"But clearly our concern is what's been going on with interest rates," Seiders said. "If rates move much higher, certainly sales are going to be coming down. Our forecast is for sales activity to peak in the second quarter."
Rates on 30-year, fixed-rate conventional mortgages have been climbing steadily since late March, averaging 10.58% last week, up from the low this year of 9.84%, according to the Federal Home Loan Mortgage Corp.
Warren Lasko, executive vice president of the Mortgage Bankers Assn. of America, said sales could be helped in May by purchasers hoping to beat out further increases.
May Merely Switch
"But by June, the bloom will be off the rose and we're going see sales trailing off," he said.
However, James Christian, chief economist of the U.S. League of Savings Institutions, said higher rates, rather than chasing buyers from the market, may simply cause them to switch to adjustable-rate mortgages.
"We've proved over and over again that adjustable-rate mortgages provide a reasonable alternative to fixed rates. Even though both rates are moving up, you still have adjustables in what has to be considered very affordable ranges," he said.
More worrisome, Christian said, is the increase in new home prices. The median, or midpoint, price of a new home was $110,500 in April, up 3.3% from March and 14.5% from a year ago.
The average price of a new home was $137,000, up 4.2% from March and 16% over the past year.