New Home Sales Tick Up in March in Uncertain Climate
|April 25, 2007|
Sales of new single-family homes increased a slight 2.6 percent in March to a seasonally adjusted annual rate of 858,000 units, following sharp declines in both January and February, according to figures released by the U.S. Commerce Department today. The March sales pace was 23.5 percent below a year earlier.
“The increase in home sales for March was quite disappointing, considering the weather-related weakness recorded earlier this year,” said David Seiders, chief economist for the National Association of Home Builders (NAHB). “Weather conditions were fundamentally good in March but we gained back only a small fraction of the January-February loss.”
“The weakness in home sales squares with the results of the recent NAHB survey of single-family home builders,” Seiders said. “Our Housing Market Index lost ground in both March and April, and reports from large companies show not only erosion of sales activity, but also an increase in sales cancellations.”
Seiders noted that the recent dampening of activity was related to the problems of the subprime mortgage sector and associated tightening of lending standards in other segments of the mortgage market.
“Builders are reporting direct impacts on both sales and cancellations as prospective buyers are unable to get mortgage credit or are unable to sell their existing homes because of credit tightening,” he said.
The inventory of new homes for sale edged up in March to 545,000 units, equivalent to a 7.8 months’ supply at the March sales pace. Completed homes for sale were 33 percent of the inventory, while units still under construction represented 50 percent of the inventory and units for-sale that were permitted but not yet started represented almost 17 percent of the inventory level. The median length of time that completed homes were on the market was 5.6 months in March, up from 5.2 months in February.
Regionally, new-home sales rebounded 50 percent in the Northeast and 9.8 percent in the Midwest in March, following severe winter weather the month before. Sales were down by 2.7 percent in the South and 0.9 percent in the West.
“The sudden tightening of mortgage conditions has had a profound impact on the housing market, and it is hard to know how far the credit pendulum will swing,” Seiders said. “NAHB’s forecast still shows improvements in home sales and housing production by the second half of this year, although these forecasts are subject to an unusually wide range of risk.”