April 27, 2006

The "Stagnant Economy" Myth

More good economic news:

NEW YORK (CNNMoney.com) - New home sales posted the biggest jump in 13 years in March, but sales got a boost as builders cut prices to cope with higher mortgage rates and a growing backlog of houses on the market.

The government reported new homes sold at an annual rate of 1.21 million homes in March, up 13.8 percent from a revised 1.07 million pace in February. That easily topped forecasts for a 1.1 million pace from economists surveyed by Briefing.com.

The jump, the biggest since a 16 percent rise in April 1993, came even as mortgage rates hit an average 6.32 percent last month for 30-year fixed-rate loans, according to Freddie Mac, up from 6.25 percent in February.

The mortgage rate was the second-highest for any month since 2002. Rates have risen further since, climbing to 6.53 percent in the most recent weekly survey.

With rising mortgage rates driving up the cost of financing home purchases, most economists have been looking for the real estate market to cool off in 2006 after several years of record sales.

But economist Bob Brusca said last month's drop in new home prices is a sign that the market for new homes isn't nearly as strong as the jump in sales would suggest.

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