Apr 23 2014, 11:18am CDT | by Forbes
Sales of newly-constructed homes fell by 14.5% in March, a significant drop underscoring that the housing market is indeed slowing down.
New single-family homes sold at an annual pace of 384,000 (seasonally adjusted) according to data released Wednesday by the Census Bureau and the Department of Housing and Urban Development. That’s a pace that is 13.3% slower than the sales rate one year earlier.
Although newly-constructed single-family homes have in recent months comprised 10% or less of the market, they are a a timely gauge of market conditions because they catch sales at the earliest possible moment: when a contract is signed. Earlier this week, the National Association of Realtors report on existing (previously owned) home sales–which measures a transaction at closings–revealed that sales also fell in March, reaching their lowest level since July 2012.
The overall housing market had been steadily recovering, with sales of new single-family homes steadily ticked up during 2011 and 2012. However, last summer saw a dramatic drop in new home sales. We’ve been steadily climbing out of the trough since–until this March. Wednesday’s new home sales data sharply missed predictions by economists surveyed by Bloomberg, who forecast new single-family home sales for March 2013 of between 440,000 and 470,0000.
Existing home sales, on the other hand, have been sluggish for several months. Rising prices and mortgage rates, an inventory shortage, and this year’s screaming winter have all contributed to the sluggish pace.
The median sales price of new homes sold in March was $290,000, the highest rate ever. The government agencies estimated that the (seasonally adjusted) supply of new single-family homes for sale at the end of March was 193,000. That represents about a 6-month supply, which is considered a healthy housing market.
Wednesday’s data on new single-family home sales reveals that the March 2014 sales rate was the lowest since July 2013, when it stood at an annual pace of 373,000 (seasonally adjusted). In February, the rate was 449,000 (seasonally adjusted). One year earlier, in March 2013, the rate was 443,000.
Other measures indicate a bit of unease regarding the future. Builder confidence in the market for newly built, single-family homes stood at a level of 47 in April, according to the latest read from the National Association of Home Builders/Wells Fargo Housing Market Index. A score of 50 or greater indicates that more builders view market conditions as good than poor.
And although housing starts (or groundbreakings) rose 2.8% in March to a seasonally adjusted rate of 946,000, the pace is still 5.9% lower than the rate one year earlier. Building permits, a good indicator of the future, stood at 990,000 (seasonally adjusted) in March. That’s 2.4% below the revised February rate, the fourth drop over the last five months.
As usual, the data varies by region. Sales of new single-family homes are up in the Northeast, but down in the South, Midwest, and West.
Trulia released a report Wednesday indicating that homes are actually moving off the market this spring a tad more quickly than the year before. The report, which compared homes for sale on the Trulia site in mid-February and in mid-April, showed that houses at the lowest end of the pricing scale are moving most quickly: 49% of homes at the low end that were for sale two months ago are still listed today, compared with 53% of mid-priced homes and 62% of the high-price tier.
“Homes for sale are moving fastest in markets with recent price gains, as well as in markets where supply is perennially tight,” said Jed Kolko in an e-mail to FORBES. “The fact that the low-price tier is moving fastest is yet another hurdle for first-time homebuyers: not only do potential first-timers face declining affordability and a slow jobs recovery, but the homes they can afford aren’t waiting on the market for them.”
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