Purchases of New Houses in U.S. Decrease for Second Month
By Timothy R. Homan
Purchases of new homes in the U.S. unexpectedly fell in February for a second month, a sign the recovery in the housing market may be uneven.
Sales dropped 1.6 percent to a 313,000 annual pace, the slowest since October, from a 318,000 rate in January that was weaker than previously reported, figures from the Commerce Department showed today in Washington. The median estimate of 78 economists surveyed by Bloomberg News called for 325,000.
Sales of new homes are struggling to gain momentum amid increasing competition from foreclosures, which are hurting all property values. Nonetheless, a pickup in hiring, growing incomes and mortgage rates near a record low are making all houses more affordable, which may help underpin the market.
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“There are signs of life in the market in certain regions, but we’re not seeing a broad-based recovery,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, who forecast a 310,000 sales pace. “Builders are still competing with existing inventories. The spring selling season should show some modest improvement, but it will be limited.”
Stocks dropped after the report. The Standard & Poor’s 500 Index fell 0.4 percent to 1,387.71 at 10:13 a.m. in New York.
Economists’ estimates ranged from 310,000 to 350,000. The rate for January was previously reported at 321,000.
The recent slowdown in demand has pushed up the amount of time it takes to sell a new house. There were 150,000 new houses on the market at the end of February, matching the prior month’s record low. The supply of homes at the current sales rate climbed to 5.8 months’ worth from 5.7 months in January.
Purchases, tabulated when contracts are signed, fell in two of the four U.S. regions, led by a 7.2 percent drop in the South. Sales fell 2.4 percent in the Midwest and rose 14 percent in the Northeast and 8 percent in the West.
The regional breakdown affected prices as demand fell in the South and Midwest where homes are less expensive and rose in the Northeast and West where they are costlier.
The median sales price increased 6.2 percent in February from the same month last year to $233,700, today’s report showed.
New-home sales have lost their ability to forecast the broader market as demand shifts to previously owned houses. Purchases of existing homes are calculated when a deal closes about a month or two later. New properties made up almost 7 percent of the market last year, down from a high of 15 percent during the last decade’s housing boom.
Existing-home purchases eased to a 4.59 million annual rate last month from a 4.63 million pace in January, the National Association of Realtors reported this week. Even with the decline, January and February sales marked the strongest start to a year since 2007.
Home foreclosures remain a concern for builders. Filings fell 8 percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said last week.
“February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s chief executive officer, said in the statement. “That should result in more states posting annual increases in the coming months.”
To hold down borrowing costs like mortgage rates, Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist.
The NAR’s affordability index climbed to a record high in January, underpinning demand. That may be why builders are gaining confidence.
Builders this year have broken ground on homes at the fastest pace since October-November 2008, according to Commerce Department figures released this week. Permits for construction climbed to the highest level since 2008, the same report showed.
The National Association of Home Builders/Wells Fargo index of builder confidence in March held at the highest level since June 2007. Sales expectations climbed for a sixth month, according to the March 19 report.
Ryland Group Inc. (RYL), which builds homes with an average price of $255,000 in 13 states, said it has a positive outlook for 2012.
“We finished the year on a strong note, entered the year optimistic and still feel fairly optimistic today,” Larry Nicholson, president and chief executive officer at the Westlake Village, California-based company, said March 6 at an investor conference. “The good thing about the traffic we are seeing is it’s new traffic. We feel a lot better than we did a year ago. Hopefully, we can keep this trend up.”