Despite the projections of a downward spiral in the housing market by Street analysts, the U.S. Commerce Department reported last week that sales of new single-family homes rose 4.9% in April. This figure caught market participants by surprise as they had been expecting a month-to-month decline based on rising mortgage rates that are currently at their highest levels in approximately four years.

The rise in sales, however, is not as impressive as it initially appears. Last month's pace was down 5.7%, compared to a year ago, and while the median home price of $238,500 is up 2.8% from March, it only represents a 0.9% increase in the median sales price from April 2005. In addition, the backlog of unsold homes rose 2.4% to a record of 565,000 unsold homes by the end of last month. If sales remain at the April pace, this translates to 5.8 months to deplete the backlog.

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