New home sales for March 2010 spiked up 27 percent from February, according to numbers released last Friday by the Commerce Department. It was the highest percentage gain form the prior month in almost 47 years.
Also increasing from a year ago was the median sales price of a new home which rose 4.3 percent, to $214,000
Is the housing market improving, or is this irrational exuberance driven by a last-minute rush to cash in on the Federal Tax Credit for purchase a home, which will expire tomorrow? Borrowers are hurrying to take advantage of these historically low mortgage interest rates which are still below 5 percent for a 30-year fixed rate mortgage. Also, to qualify for the tax credit, they must have an executed signed sale contract by April 30, and close by June 30.
The good news is new home sales were up in all four regions of the country, led by the South, which saw an increase of 44 percent, followed by the Northeast at 36 percent. Lagging way behind yet still in positive territory, were the West at 6 percent and the Midwest at 4 percent.
Existing home sales for March should be released early next week and I expect a similar spike in existing home sales over February.
The real indication to the extent of the housing recovery will be contracts signed and executed after the expiration of the tax credit. Current mortgage interest rates should still be at or near historically low levels in the foreseeable future, yet will probably not be enough to sustain the sales numbers we have seen in the recent months with the availability of the tax credit.
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