The return of McMansions

Though the recession all but left the housing market on its knees, new home sales are being driven by an unlikely factor – the rise in demand for new, larger housing.

These houses - dubbed McMansions - are being built in order to appeal to homeowners who might be hesitant to buy a new home in feeble economic times.

Often over 3,000-square-feet, these homes also feature high ceilings, more space, and an overall luxury, but at the same price of other homes on the market.

Numbers released Wednesday shows rising sales and prices provided evidence that a housing market recovery was gaining some traction.

The housing sector has been the Achilles' heel of the economy ever since the home-price bubble burst. Data this week, however, has painted a relatively upbeat picture for the market and underscored the economy's resilience.

'The recent buoyancy in housing market activity has raised hopes that this beleaguered sector may finally be on the verge of a rebound,' said Millan Mulraine, senior macro strategist at TD Securities in New York.

New home sales increased 3.3 per cent to a seasonally adjusted 343,000-unit annual rate, the Commerce Department said on Wednesday. Compared with April last year, sales were up 9.9 per cent.

The report came on the heels of news on Tuesday that home resales hit a two-year high, with the sector getting support from investors who are increasingly seeing value.

Even more encouraging, the median price for both new and previously owned homes surged last month, a further sign of life for a market that has struggled to come back from its 2006 collapse.

The median price of a new home rose to $235,700 last month, up 4.9 per cent from a year ago.

While the data does not indicate the size of new homes built or sold, SmartMoney points out that the average square footage of any given home size has gone up – not down – in the recession, in part because developers are trying to attract potential buyers.

Despite the rise in sales, the market continues to be hamstrung by an oversupply of previously owned homes - especially from foreclosures, many of which sell well below their market value.