New Home Sales
The latest housing report has to go down as a ‘cat amongst the pigeons’ data point, and gets to the heart of the current debate over how quickly investors fear the Fed must raise rates as the economy recovers. New home sales are approximately one million units lower per year at this stage of the recovery by comparison to the peak of activity.
Does that sound like interest rates must go up any time soon? Meanwhile, as you can see in the accompanying chart, prices of units that did sell were considerably higher in March than in the prior month. Both average and median prices advanced with the latter rising to $290,000 from $260,000 last month.
In the month of March exactly 10-years ago, the number of new homes sold ran at an annualized pace of 1.276 million units. At that point the construction industry could look forward to another 16-months of over-building across the reaches of the U.S. economy before activity would face a multi-year plunge. In July 2005 new home sales peaked at 1.389 million units. By contrast today’s latest report for March shows a far worse-than-expected pace of 384,000 sales – the fewest in eight months – despite the fact harsh winter weather improved.
Sales tumbled by 21.5% in the Midwest to the least since September and by 16.7% in the West to the lowest level since January 2012. The South and West comprise the two largest selling areas. while only in the smallest – the Northeast – did sales advance. At the end of March the supply of 193,000 units was the largest available since November 2010. At the latest pace of sales it would take six months to sell the entire inventory, up from five months in February.
The report comes one day after a weaker than expected existing homes sales report adding to concern regarding the housing sector.
Chart – Existing home sales plunged in March