New Home Sales Spike in March – Market Showing Signs of Stabilizing

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in March were at a seasonally adjusted annual rate of 411,000, a 26.9 percent increase from the revised February rate of 324,000 and is 23.8 percent above a year ago.
The inventory of new homes (seasonally adjusted) at the end of March is 6.7 months a huge decline from February’s 9.2 month supply.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales (nor does Standard & Poors, publisher of the Case/Shiller Index, now either as I wrote about). Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 38,000 new homes sold in March, a jaw-dropping increase of 52.0 percent from February’s 25,000 new homes sold and also a 22.6 percent increase from March 2009 when there were 31,000 new homes sold.
    • 55.2 percent (21,000) of the new homes sold were in the South region- an increase of 75 percent from February.
    • the west region had 9,000 new homes sold, an increase of 28.5 percent from February
    • the Midwest had 4,000 new homes sold, the same as February.
    • The Northeast had 3,000 new homes sold, a 50 percent increase from February.
  • YTD – In the first three months of 2010 there have been 87,000 new homes sold, an increase of 3.6 percent from the same time last year.
  • Median sale price of new homes in the US in March was $214,000, a 2.9 percent increase from February’s median new home price of $220,500 and a 4.3 percent increase from a year ago when the median new home price was $205,100.
  • New Homes in the US in March have been for sale for a median time of 14.4 months since the homes were completed, the same as last month. This is the first month this number has not increased.

My prediction for 2010

I’ve been pretty negative on the new home market, but after seeing the big upswing in existing home sales yesterday and then these encouraging numbers for new home sales today, I’m feeling a little better. Things are definitely pointed the right direction and I feel we may be seeing a stabilizing of the housing market as well as new home supply and demand trying to find an equilibrium.

I do think however we should all have “cautious optimism” as almost half of March’s home sales were first time home buyers who could be racing to beat the April 30th deadline to buy. My guess is we will see pretty good sales numbers in April as well, then the next couple of months beyond that will tell us if the market truly has any staying power or if it was just the “sugar-rush” of the tax-credits that boosted the market.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

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