November 30, 2020

Sales of New Single-Family Homes Rose in April

The Commerce Department said sales increased 7.3 percent to a seasonally adjusted annual rate of 323,000 units, the highest level since December, while prices also rose. Economists had expected a 300,000-unit rate.

All four regions recorded gains in sales, with the West reporting a 15.1 percent rise. Compared with April last year, however, sales were down 23.1 percent.

“Although the headline figure has moved sharply on a month-to-month basis, reflecting in part the impact of harsh weather in earlier months, the bottom line is that the new-home market continues to bounce along the bottom,” said Omair Sharif, an economist at RBS in Stamford, Conn.

An oversupply of used houses and a relentless wave of foreclosed properties are curbing the market for new homes, even as builders are keeping lean inventories.

A record low 175,000 new homes were available for sale last month, down 2.8 percent from the previous month.

Data last week showed a steep drop in new home construction in April and a decline in sales of previously owned homes.

“There’s still a tremendous overhang in the housing market, and while new-home sales are starting to percolate, that doesn’t change the fact that we still have such huge inventory,” said Michael Yoshikami, chief investment strategist at Ycmnet Advisors in Walnut Creek, Calif.

While the report cast a positive light on the housing market, it did little to change perceptions that the economy remained mired in a soft patch.

That view was reinforced by a Richmond Federal Reserve survey showing that manufacturing activity in the central Atlantic region stalled in May, after expanding during the previous seven months.

The Richmond Fed’s manufacturing index came in at minus 6, a contraction from the reading of plus 10 in April, dragged down by declines in shipments and new orders. A negative number indicates contraction.

The Commerce Department report also showed that the median sales price for a new home rose 1.6 percent last month to $217,900. Compared with April last year, the median price increased 4.6 percent.

At April’s sales pace, the supply of new homes on the market dropped to 6.5 months’ worth, the lowest since April last year, from 7.2 months’ worth in March.

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U.S. Home Sales Top Forecasts in March

Sales of previously owned homes in the United States rose more than expected in March, a trade group said Wednesday, raising cautious optimism about the housing market.

The National Association of Realtors said sales rose 3.7 percent month over month to an annual rate of 5.10 million units after an upwardly revised pace of 4.92 million units in February.

Economists polled by Reuters had expected sales to rise 2.5 percent to a 5-million-unit pace from the previously reported 4.88-million-unit rate. Sales have now risen in six of the last eight months.

“It’s slow, steady progress, but you cannot not be disturbed by the slow pace of recovery,” said Pierre Ellis, an economist at Decision Economics in New York. “Demand is rising even with higher mortgage rates so that’s encouraging.”

The housing market is struggling to find its footing as a wave of foreclosed properties keeps supply elevated and prices depressed.

Last month, foreclosures and short sales, which typically occur at about 20 percent below market value, accounted for 40 percent of transactions. That was the highest since April 2009 and was up from 39 percent in February.

The median home price fell 5.9 percent in March from a year earlier, to $159,600. Compared with March last year, sales were down 6.3 percent.

“A sustained turnaround in the housing market is still far off based on earlier-released depressed readings for housing starts, building permits and builders’ confidence indices,” said Krishen Rangasamy, an economist at CIBC World Markets in Toronto.

A separate report on Wednesday showed demand for home loans rose last week, as interest rates eased and purchase activity picked up. The Mortgage Bankers Association said its purchase index rose 10 percent to 210.8, the highest since early December.

Last month, all-cash purchases made up a record 35 percent of sales in March and the NAR said the lower and upper ends of the market were showing strong activity, with the middle part remaining sluggish.

Sales last month rose across the board, with multifamily dwellings rising 1.6 percent and single-family home units advancing 4 percent.

At March’s sales pace, the supply of existing homes on the market slipped to 8.4 months’ worth, from 8.5 months in February. However, the number of previously owned homes on the market rose 1.5 percent, to 3.55 million.

A supply of six to seven months is generally considered ideal, with higher readings pointing to lower house prices.

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