New home sales fell in March for the third consecutive month. Sales in the first quarter are up just 1.3% from the same quarter in 2015.
New home prices declined 3.2% in March from February, and 1.8% from March 2015.
The Bloomberg Econoday consensus estimate was for 522,000 new home sales at a seasonally adjusted annualized rate (SAAR). The Commerce Department report pegs actual sales at 511,000 SAAR.
Highlights
Growth in new homes isn’t spectacular but, given how soft general economic conditions are, the sector is posting moderate and still respectable numbers. March sales came in at a 511,000 annualized rate which is on the low side of expectations but the report includes a 7,000 upward revision to 519,000 for February which now stands as among the very best months since 2008. Year-on-year, sales are up 5.4 percent, right in line with permits which are up 4.6 percent.
Lack of new homes on the market, which has been holding down sales, improved a bit in April, to 246,000 units for a 2.1 percent monthly gain. And sales relative to supply is also improving, to 5.8 months vs 5.6 months in February and 5.1 months a year ago. Supply at 6.0 months relative to sales is generally considered to be consistent with a balanced market.
New homes aren’t showing much price traction, down 3.2 percent in the month to a median $288,000 which is down, not up, 1.8 percent from last year.
Regional data are mixed. The Midwest shows an oversized gain in March with the South a solid gain and with year-on-year rates very solid for both, in the low to mid-double digits. But the West, which is a key region for new homes, is definitely lagging, down more than 20 percent on both the month and the year.
Spring is the big season for the housing market and this report, together with an uptick in last week’s March report for existing home sales, do keep the door open for a solid season, one that could contribute to a needed pickup in the pace of the overall economy.
Recent History
New home sales have held near a 500,000 annualized pace since first approaching the rate in late 2014, this despite high levels of employment and low mortgage rates where the 30-year is still below 4 percent. The number of new homes coming into the market has been improving but is still lagging and holding down sales. Prices, however, are low and probably not holding down sales, showing only marginal sub-3 percent appreciation in this report. Forecasters see new homes holding near prior rates, up slightly to a 522,000 annualized rate for March which would follow last week’s improvement in existing home sales to a 5.330 million rate.
Lack of News Homes Holding Down Sales?
Bloomberg noted “lack of new homes on the market has been holding down sales.”
Unlike existing home sales, new homes sales are recorded the moment a contract is signed. Thus, new home weakness is based on demand (or lack of demand) not lack of supply.
Bloomberg notes supply is “balanced”. That’s further evidence of the silliness of their claim supply is holding down sales.
Price action is telling. Anyone who wants a home and can afford an expensive home, likely already has one. This is not a market in which builders want to start masses of homes on spec. Doing so would further depress prices.
Mike “Mish” Shedlock
