by Alan Zibel and Christopher S. Rugaber Associated Press Apr. 24, 2010 12:00 AM
WASHINGTON - Sales of new homes took the biggest monthly jump in 47 years in March, while orders for most large manufactured products rose by the largest amount since the recession started.
While factories are benefiting from a sharp increase in orders from U.S. and foreign businesses, the fuel for new-home sales is coming from a less sustainable source: government subsidies.
Some analysts predict demand for homes will fall again this summer, preventing the beleaguered sector from adding to the economic recovery.
The Commerce Department said Friday that new home sales skyrocketed 27 percent in March, bouncing off February's record low. The figure blew past expectations as better weather and government incentives boosted sales.
New orders for durable goods - those expected to last at least three years - fell by 1.3 percent, the government said. But excluding demand for aircraft and other transportation goods, orders surged 2.8 percent, much more than analysts had projected.
The report was evidence businesses are spending more on new equipment in anticipation of a stronger economy.
"Firms are finally putting their money where their mouths are and betting on a rebound," Diane Swonk, chief economist at Mesirow Financial, wrote in a note to clients.
New-home sales, meanwhile, hit a seasonally adjusted annual pace of 411,000, the strongest month since last July. The data reflect signed contracts to purchase homes rather than completed sales and thus give economists a feel for how many buyers were out shopping.
It is likely capturing consumers who are trying to qualify for federal tax credits that expire next week. The government is offering an $8,000 credit for first-time buyers and $6,500 for current homeowners who buy and move into another property. To qualify, buyers must have a signed contract complete by April 30 and must complete their transaction by the end of June. "Everyone's just trying to sign on the dotted line," said Jennifer Lee of BMO Capital Markets.
New-home sales, orders for durable goods rise
