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Ahead of the Bell: US New Homes Sales

Christopher s. Rugaber, AP Economics Writer

WASHINGTON (AP) -- U.S. sales of new homes likely ticked up in March to a level not far from the 4½ year high reached in January, a sign the housing market remains healthy.

Economists forecast that new home sales rose to a seasonally adjusted annual rate of 420,000 in March, according to a survey by FactSet. The report will be released at 8:30 a.m. EDT Tuesday.

New home sales fell 4.6 percent in February from January to a seasonally adjusted annual rate of 411,000. January's pace of 431,000 was the strongest since September 2008.

New home sales remain below the 700,000 level considered healthy. But overall, housing is recovering at a steady pace and economists expect it will show signs of greater strength in the spring buying season.

U.S. homebuilders started work on more than 1 million new houses and apartments in March at a seasonally adjusted annual rate, the first time it had crossed that threshold in nearly five years. That reflected a surge in apartment building, while single-family home construction fell.

And sales of previously-occupied homes dipped in March from February, the National Association of Realtors said Monday. But sales were 10.3 percent higher than a year earlier.

And there were other positive signs in the report. Inventories have now increased for two straight months after eight months of declines, the Realtors' group said. That suggests more sellers are confident that the recovery will continue and they can sell at a good price.

That's important because sales of previously-occupied homes have been held back by a limited supply. Builders sharply cut back on construction in the wake of the housing bubble. And many homeowners were reluctant to sell after prices fell about one-third nationwide in the past five years.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses. The rise in demand is helping to boost sales and prices in most markets.

Low inventories are just one of several constraints. Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. That has made it harder for first-time homebuyers to qualify for the super-low mortgage rates that have resulted from the Federal Reserve's efforts to ease credit.

First-time home buyers are important for a sustainable housing recovery, but they accounted for only 30 percent of previously occupied home sales in March, the same as the previous month. That's below the 40 percent that is typical in a healthy market.