New home sales and prices increase in March

Today, the U.S. Department of Housing and Urban Development and U.S. Census Bureau released new home sales data for March 2011 showing an increase of 11.1 percent from the month before, and a decrease of 21.9 percent from a year ago.

The seasonally-adjusted new home sales rate for March was 300,000 homes. The supply of new homes on the market decreased from an adjusted 8.2 month supply the month before to a 7.3 month supply in March. The median new home price increased for the month to $213,800, a 2.9 percent increase from a revised median price of $207,700 the month before and a decrease of 4.9 percent from a year ago.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing the “rate” of new home sales paints a realistic picture of the market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting” For March, 2011:

  • 29,000 new homes sold, an increase of 38 percent from 21,000 new homes sold in the previous month, and a 19.4 percent decrease from a year ago when there were 36,000 new homes sold.
    • As usual, the South had the majority of the new home sales with 16,000 this month (55.2 percent of the total in US)
    • the west region had 7,000 new homes sold.
    • the Midwest had 3,000 new homes sold.
    • The Northeast had 3,000 new homes sold.
  • YTD there have been 71,000 new homes sold, a 17.4 percent decrease from this time last year.
  • New Homes in the US in sold during the month been for sale for a median time of 8.5 months since the homes were completed, up from 8.1 months the month before.

A coming new home shortage?….

In a recent story in Fortune, Mike Castleman, the CEO of Metrostudy (a company that tracks real-time data on new-home inventory in the U.S.), said “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today”. While I love what Castleman is saying, I have a hard time seeing a shortage of new homes in the U.S. anytime soon….afterall, even at the dismal low rate new homes are being built, there are still almost twice as many new homes being completed as are being sold in the U.S. Granted, I do think we will see local markets where demand for new homes will increase significantly, particularly once the inventory of distressed sale homes has fallen back to more normal levels, however, I think it will be sometime before we see this in many markets….there is just too much negative pressure on the market from distressed sales at this point.

My prediction for 2011…

I have to admit, while I do think the real estate market is pretty much at the bottom (a rocky bottom at that) and in many markets is starting to trend slightly upward, I’m having a hard time not adjusting my predication of new home sales downward due to the sluggish start in first quarter. However, I’m going to call the glass half-full, put my rose-tinted glasses on and leave my prediction where it has been all year….331,000 – 361,000 new homes sold in 2011.

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