New U.S. single-family home sales surged to an eight-month high in March, pointing to underlying strength in the economy despite an apparent sharp slowdown in growth in the first quarter.
The Commerce Department said on Tuesday new home sales jumped 5.8 % to a seasonally adjusted annual rate of 621,00 units last month, the highest level since July 2016.
February's sales pace was revised down to 587,000 units from the previously reported 592,000 units.
New home sales were up 15.6 % compared to March 2016.
Economists polled by Reuters had forecast new home sales, which account for about 9.8 % of overall home sales, slipping 0.8 % to a pace of 583,000 units last month.
Sales have now increased for three straight months. A tightening labor market, marked by a 4.5 % unemployment rate, is boosting employment opportunities for young Americans and helping to support the housing market.
In addition, mortgage rates are low by historic standards.
The 30-year fixed mortgage rate is currently averaging around a five-month low of 3.97 %. New home sales are benefiting from a shortage of properties in the market for previously owned homes.
A report last Friday showed sales of existing homes surging 4.4 % to a 10-year high in March. Housing market strength suggests that signs of a sharp moderation in economic growth in the first quarter are an aberration.
The Atlanta Federal Reserve is forecasting gross domestic product rising at a 0.5 % annualized rate in the first quarter after increasing at a 2.1 % pace in the final three months of 2016. The government will publish its advance first-quarter GDP estimate on Friday.
Last month, new single-family homes sales soared 25.8 % in the Northeast region, reversing the prior month's 24.4 % plunge. Sales jumped 16.7% in the West to their highest level since July 2007. They increased 1.6 % in the South but fell 4.5 % in the Midwest.
The inventory of new homes on the market increased 1.1 % to 268,000 units last month, the highest level since July 2009. Still, new housing stock remains less than half of what it was at its peak during the housing boom in 2006. At March's sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.4 months in February.
A six-month supply is viewed as a healthy balance between supply and demand. The median price for a new home rose 1.2 % to $315,100 in March from a year ago.