New U.S. home sales surged in April

Biggest gain in 14 years as median prices fell by record amount

The Associated Press
Updated: 9:33 a.m. PT May 24, 2007

WASHINGTON - Sales of new homes surged in April by the biggest amount in 14 years, but the median price of a new home dropped by the largest amount on record. The mixed signals left no clear picture of whether the worst of the nation’s housing slump is over.

The Commerce Department reported that sales of new single-family homes jumped by 16.2 percent in April to a seasonally adjusted annual rate of 981,000 units. That was far better than the tiny 0.2 percent gain that economists had been expecting.

However, the median price of a new home sold last month fell to $229,100, a record 11.1 percent decline from the previous month. The big price decline indicated that builders are slashing prices in an effort to move a huge overhang of unsold homes.

The jump in sales was the biggest increase since a 16.4 percent surge in new home sales that occurred in April 1993.

However, analysts cautioned against reading too much into the big gain, especially in light of other surveys showing that builder confidence has sunk in recent months over worries that troubles in the subprime mortgage market will further crimp demand in coming months.

The strength in sales was led by a 27.8 percent surge in the South. Sales were also up in the West by 8.5 percent and in the Northeast, where they rose 3.8 percent.

Sales fell in the Midwest, dropping by 4 percent.

The drop in median prices in April compared to March was a record one-month decline. If the April sales price was compared to the sales price a year ago, the decline was 10.9 percent, the biggest year-over-year drop since 1970.

In other economic news, the Commerce Department said that orders to U.S. factories for big-ticket manufactured goods posted a moderate 0.6 percent increase in April, helped by a continued rebound in business investment.

In a third report, the Labor Department said that the number of newly laid off workers filing applications for unemployment benefits rose to 311,000 last week, an increase of 15,000. But even with the gain, claims remain at a level indicating a healthy labor market.

While the increase in orders for durable goods was less than had been expected, the government sharply revised the March performance to show a 5 percent surge, much stronger than the 3.7 percent gain previously reported.

Analysts believe that U.S. factories, which have been buffeted by the weakness in housing and slumping demand for autos, are starting to stage a moderate rebound, helped by reviving interest on the part of businesses to spend money to expand and modernize.

The overall economy slowed in the first three months of this year to an annual growth rate of just 1.3 percent, the weakest performance in four years, as a steep slump in housing continued to weigh on the economy’s performance.

Analysts are hoping that spending by consumers and businesses will be able to overcome the weakness in housing and keep the country out of a recession.


The report on durable goods offered encouragement in the area of business investment. It showed that demand for capital goods excluding airplanes, considered a good proxy for business investment, rose by 1.2 percent in April following, the second solid monthly increase.

The 0.6 percent rise in total durable goods orders came even though demand for transportation products fell by 1.3 percent. This reflected a drop of 10.7 percent in demand for commercial aircraft and a 1.9 percent fall in orders for motor vehicles.

Excluding transportation, orders would have been up by 1.5 percent, the same performance as in March.

There was strength in orders for primary metals such as steel which rose by 4.3 percent and orders for electronic equipment and appliances, which rose by 3.8 percent.

But demand was weak for computers, which fell by 7.8 percent, and communications equipment, which dropped 5 percent.