New-Home Sales Up in March, But Trend Is Down
Sales of new single-family homes were up 13.8% in March, following an 11% decline the month before, the U.S. Commerce Department reported last week. However, the sales pace for the first quarter of 2006 was 9.7% below the fourth quarter of 2005, and year-to-date sales were down 8.2% from the year before.
“While we were expecting a slight rebound in sales from the pace reported by the government for February, we definitely are seeing demand taper off from the highs of last year as interest rates inch up and affordability becomes a more overriding factor,” said NAHB President David Pressly. “Indeed, builders are offering more sales incentives and are shifting their production mix toward more moderately priced homes.”
“Month-to-month changes in the new-home sales series are notoriously volatile, but the quarterly pattern of sales is reasonably in keeping with other housing indicators, including NAHB’s surveys of single-family builders,” said NAHB Chief Economist David Seiders. “This longer-term pattern is consistent with the orderly cooling down process we’ve been anticipating, as affordability problems and reduced investor demand bring home sales down from the unsustainable levels of 2005.”
According to Commerce Department figures, new-home sales rose to a seasonally adjusted annual rate of 1.213 million units in March. However, the sales pace was 1.159 million units for the first quarter as a whole, down from 1.283 million units for the last quarter of 2005 and down from 1.249 million units for the first quarter of last year.
March new-home sales rose 4.7% in the Northeast, 6.9% in the South, 10.9% in the Midwest and 35.7% in the West. However, the first-quarter average was below the final quarter of 2005 in all regions.
The inventory of new homes for sale rose to 555,000 units at the end of March, a 5.5 months’ supply at the current sales pace. Of that total, for-sale units that were not yet started showed the largest increase and represented 20.2% of the inventory. Units still under construction were almost 57% of the inventory, and completed homes for sale were 23% of the total ― about the same as a year earlier.
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Seiders Predicts 'Soft Landing' on the NAHB Economics Blog
NAHB Chief Economist David Seiders says a "soft landing for housing is still in the cards" on NAHB's economics blog, “Seiders on Housing” — an informal Internet-based forum dealing with economic issues, housing trends, survey research and other topics affecting the housing sector of the economy.
Log onto the blog at http://nahbblog.blogs.com and get direct access to Seiders' expert opinions, projections and responses. Then let Seiders know what you think by giving your perspective.