 | New single-family home sales declined 1.6% in February to a 313,000 annual |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: The housing market is on the mend, but new home sales will be the last thing to fully recover. Home building hit an upward inflection point in the middle of last year, home prices have leveled off in much of the country, and existing home sales have been in an upward trend for the past several months. As the chart above shows, new home sales have also been trending up. Even though they slipped 1.6% in February, they're up 11.4% versus a year ago. But, with banks now able to move forward with the foreclosure process, a large inventory of bargain-priced existing homes should temporarily attract more buyers away from the new home market. We still expect a full recovery for new home sales; sometime over the next several years, sales will rise to an annual pace of about 950,000. But the recovery in new home sales will take longer than the recovery in the rest of housing. The other problem affecting new home sales is a lack of inventory. The number of unsold but completed new homes is the lowest since 1971; the number of unsold new homes that are still under construction is the lowest since the early 1960s. Notably, the inventory of new homes where the builder has yet to break ground continues to climb, showing that builders are getting ready for what they believe will be more buyers. We think they're right. In other recent housing news, the FHFA index, a measure of prices for homes financed by conforming mortgages, was unchanged in January (seasonally-adjusted) and is down 0.7% from a year ago. The index has been roughly unchanged since mid-2011. We expect a slight price increase in the year ahead, the first since 2006-07. In other news on the broader economy, new claims for unemployment insurance declined 5,000 last week to 348,000, the lowest level since March 2008. Continuing claims for regular state benefits dropped 9,000 to 3.35 million, the lowest since August 2008. At present, it looks like private payrolls expanded by another 200,000 in March.
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