WASHINGTON - The housing market sprang back to life in April as consumers took advantage of mild weather to push sales of new single-family homes to the highest level in more than six years, the Commerce Department reported yesterday.
Sales were recorded at an annual rate of 751,000, the hottest pace since December 1986, a department spokesman said. After the lackluster rate of 612,000 in March, sales jumped 22.7% to mark the biggest monthly increase in six and a half years.
Home sales rebounded in all regions of the United States, led by the Northeast where they more than doubled to 111,000 from 55,000 in March. Other regions also posted double-digit growth, with sales in the West up 13.4%, the South, 17.1 %, and the Midwest, 11.9%.
Analysts said the figures, which caught the bond market by surprise and knocked down prices, provided solid evidence that the housing industry is starting to show some growth after harsh weather in February and March suppressed demand.
"Unseasonably bad weather kept buyers on the sidelines for many a weekend when they otherwise would have been shopping for a home," said Mark Obrinsky, senior economist for the Federal National Mortgage Association. "Clearly, they got back into the market in April."
David Lereah, chief economist for the Mortgage Bankers Association, agreed. "The weather finally cleared, and people got in their cars and went out and put down new contracts on homes." he said.
Analysts stressed that the April sales pace is probably unsustainable, but they agreed that the numbers were a pleasant surprise after many recent economic reports suggesting only a modest recovery. "They are juicy, and they put a smile on my face," Lereah said.
A separate report issued yesterday by the Commerce Department that the index of leading economic indicators was up a feeble 0.1% in April served as a reminder that the economy is still struggling. Only six of the 11 indicators in the series made a positive contribution to the index, while five were negative.
"Overall growth of the economy as judged by the leaders is still lackluster." said Nancy Kimelman, chief economist for Technical Data, a division of Thomson Financial Services.
Still, with housing sales coming back and some other indicators such as new car sales doing well, analysts were sticking to their forecasts that the economy will gradually improve as the year goes on.
Obrinsky said the average growth rate for new home sales in the three-month period that ended in April was 655,000 and that he is looking for sales of 675,000 for all of 1993. That would be an increase of over 10% from last year's total of 610,000.
Obrinsky said he expects to see economic growth hit 3.5% in the second half of the year, which would be up considerably from the revised 0.9% reported last week for the first quarter.
Lower interest rates and modest job creation in coming months should help to lift the economy, Obrinsky said. He estimated that this Friday's report from the Labor Department will show nonfarm payrolls increased by 150,000 in May, close to the pace needed to achieve economic growth of 3%.
Richard Berner, chief economist for Mellon Bank in Pittsburgh, said that consumers and businesses have been holding back because of President Clinton's constant talk of tax increases and health-care reform. "But the main message is that nonetheless there is some response to lower interest rates," and that is spurring home sales, he said.
Interest rates have edged up slightly in recent weeks on renewed fears of inflation and worries that the Federal Reserve will tighten monetary policy. Still, rates are comfortably low for many home buyers. In the week ended May 28, the average for 30-year fixed-rate mortgages was 7.50%, and the rate for one-year adjustable rate mortgages was 4.65%. according to the Federal Home Loan Mortgage Corp.