Sales of new homes surged 14.8% in April from March, the Commerce Department reported Wednesday, as an expiring federal tax credit for buyers helped fuel activity. Without the popular incentive, many analysts are expecting sales to slump in months to come.
"Clearly, government handouts have had their desired effect: They juiced home sales and helped builders clear out even more inventory," said Michael D. Larson, an interest rate and housing analyst with Weiss Research. "We're also going to see yet another hangover in the coming couple of months due to the tax credit's expiration, with sales rates dropping off."
New single-family houses sold at a seasonally adjusted annual rate of 504,000 units in April, the Commerce Department said. That was 47.8% above the April 2009 pace.
New home sales in April were up 21.7% in the West from March. Sales rose 10.8% in the South and 31.6% in the Midwest but were flat in the Northeast.
Patrick Newport, U.S. economist with IHS Global Insight, said he was optimistic that factors other than the federal tax credit of up to $8,000 for first-time buyers and $6,500 for current homeowners that expired April 30 were at work.
He noted that a quarter of the new homes sold last month hadn't been started and just under a third were being built when sold. That means many may not be completed by June 30, when deals must close to qualify for the federal incentive. That was a "sign that many new homes are being bought by people who want to live in new homes, not by individuals looking to take advantage of a tax credit," he said.
Because the Commerce Department reports sales of new homes when contracts are signed — unlike sales of previously owned homes, which are reported when deals close — last month probably was the peak of any boost from the credits.
The median price of new houses sold in April was $198,400, and the inventory of new homes for sale at the end of April was 211,000, representing a five-month supply.