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Price Plunge Boosts March New Home Sales

After experiencing the sharpest drop in two years in February, new home sales increased 1.5 percent to a seasonally adjusted annual rate of 417,000 in March, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrs/pdf/newressales_201303.pdf reported Tuesday. Economists surveyed by Bloomberg expected March sales to increase to 419,000 from February's 411,000.

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The median price of a new home, according to the Census-HUD report, plunged $17,900 (or 6.8 percent) in March to $247,000, the largest month-over-month decline since February 2011.

The inventory of homes available for sale rose to 153,000--the highest level since November 2011--translating to a 4.4 month supply, matching February.

Sales had fallen 7.6 percent in February, the largest drop since February 2011.

The Census-HUD report tracks contract signings, not closings. While the boost in sales is a positive sign, the sharp drop in prices was consistent with the drop in builder confidence reported last week by the National Association of Home Builders (NAHB). The ""decline in the NAHB’s Housing Market Index"":http://dsnews.comarticles/weak-prices-drop-builder-confidence-for-3rd-straight-month-2013-04-15, though, was driven largely by a drop in buyer traffic.

The average price of a new home fell a staggering $30,100 in March (9.7 percent) to $279,900, its lowest level since last June. The monthly average price decline was the steepest in both dollar and percentage terms since August 2008, when the average price fell $36,400--or 12.8 percent--in one month.

The median price of a new home remained ahead of the price one year ago by 3.0 percent, the weakest year-over-year gain since last June. The average price, however, was 1.3 percent below the average price in March 2012.

The sharp drop in prices add new challenges to builders who are already seeing a shift in preferences as ""housing starts tilt to multifamily"":http://dsnews.comarticles/multi-family-boosts-march-housing-starts-permits-slip-2013-04-16 from single-family. In its last report on housing permits and starts, Census and HUD said the entire increase in housing starts in March was attributable to multifamily activity as single-family starts fell.

That report also showed builders completed 593,000 new single family homes in March, far above the sales pace. Indeed, the gap between March completions and sales was 176,000, the widest since August 2011, when builders completed 186,000 more homes than they sold.

The government report on new homes came on the heels of the ""report Monday"":http://dsnews.comarticles/price-jump-sends-march-existing-home-sales-down-2013-04-22 from the National Association of Realtors (NAR) that existing-home sale closings fell 0.6 percent in March as the median price of an existing single-family home rose. The NAR’s Pending Home Sales Index, which parallels the new home sales report, will be released next week.

Homes with price tags under $300,000 represented 68 percent of March sales, up from 64 percent in February. Homes priced below $150,000 represented 13 percent of March sales, up from 10 percent in February. Homes prices at $400,000 or more represented 13 percent of March sales, down from 21 percent in February.

The boost in sales for lower priced homes could mean more construction activity for less expensive homes--primarily low-end, starter homes--but also reduced profit margins for builders.

Regionally, sales improved in two of the four Census regions: up 35,000 in the South to 215,000 and 7,000 in the Northeast to 41,000. Sales fell 29,000 to 110,000 in the West and dropped 7,000 in the Midwest to 51,000.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. Eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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