 | New single-family home sales declined 7.1% in March |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: Please ignore the headline of a 7.1% drop in new home sales in March. It's very misleading. The reason for the drop is that February sales were revised up substantially, to a 353,000 annual rate from a prior estimate of only 313,000. In this situation, it's more important to look at the level of sales in March (328,000 annualized), which narrowly beat consensus expectations (325,000) and is up 7.5% from a year ago. The bad news for builders of single-family homes is not completely over. Now that banks can move forward with foreclosures more quickly, a large inventory of bargain-priced existing homes could temporarily attract some buyers away from the new home market. But, the road ahead looks better than it's looked in years. The upward trend in home sales is only one piece of good news for builders. Another is that the total inventory of new homes is at a new record low (see lower chart to right). Notably, however, the inventory of new homes where the builder has yet to break ground continues to climb, showing builders are getting ready for what they believe will be more buyers. We think they're right. In fact, a lack of inventories is probably holding back sales. The other piece of good news for builders is that new home prices are climbing, with the median price of a new home up 6.3% from a year ago and average prices up 11.7%. In other news on home prices, the FHFA index, a measure for homes financed by conforming mortgages, was up 0.3% in February and is up 0.4% from a year ago, the largest gain since 2006-07. The Case-Shiller index, which measures homes in the 20 largest metro areas around the country, increased 0.2% in February, the first gain in ten months, but is still down 3.5% from a year ago. Twelve of 20 metro areas had price increases, led by Phoenix. Atlanta had the largest decline. We expect the Case-Shiller index to be up slightly for 2012. In manufacturing news this morning, the Richmond Fed index, a measure of factory activity in the mid-Atlantic, increased to +14 in April from +7 in March.
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