Home sales post only a modest increase

WASHINGTON — Sales of new homes, helped by better weather, posted a modest increase in March, but the gain was less than expected and did not dispel concerns about continuing troubles in the housing industry.

The Commerce Department reported Wednesday that new single-family home sales rose to a seasonally adjusted annual rate of 858,000 units in March, an increase of 2.6 percent from February, which had been the slowest sales pace in nearly seven years.

The March improvement was half what analysts had forecast and left the sales pace 23.5 percent lower than a year ago as the housing industry continues a painful adjustment after a boom period in which sales of new and existing homes set records for five straight years.

The weaker-than-expected performance of new home sales followed a report Tuesday that sales of existing homes had fallen by 8.4 percent in March, the biggest drop in 18 years, leaving sales of existing homes at an annual rate of 6.12 million units.

In other evidence of housing's troubles, the Federal Reserve said Wednesday that home sales continued to weaken in much of the country through mid-April. Many Fed districts reported continued declines in home construction as builders try to reduce record levels of unsold homes.

However, the weak housing performance did not dampen the mood on Wall Street. The Dow Jones industrial average surged past the 13,000-point milestone on Wednesday, rising by 135.95 points to close at 13,089.89. It took the Dow just six months to reach the new milestone after its first close above 12,000 last Oct. 18.

The slump in housing, which began last year, has been a significant drag on economic growth. Analysts expect those troubles to continue as rising mortgage foreclosures dump more homes on the market and cause lenders to toughen their standards, making it harder for prospective buyers to qualify for loans.

The median price of a new home sold in March rose to $254,000, a 6.4 percent increase over a year ago. But analysts said the figure was skewed because the biggest jump in sales occurred in the Northeast, where home prices are generally higher than elsewhere.

David Seiders, chief economist at the National Association of Home Builders, said the latest housing data was a disappointment after hopes had been raised last year that the housing slump might be ending. He and other analysts attributed this year's weakness to troubles in the mortgage market, especially in subprime loans, which are offered to borrowers with weak credit histories.

Seiders said his monthly survey of builder attitudes found a heavy use of incentives, with half of the builders saying they were cutting prices to make sales.