Buyers signed contracts in March at a seasonally adjusted annual rate of 300,000, an 11 percent increase from the month before but down from 384,000 in March 2010, the Census Bureau said Monday.
In March 2005, when a lack of income or savings was no deterrent to getting a dream home with granite countertops and a walk-in pantry, families and investors flocked to new homes at an annual rate of 1.43 million houses.
The millions of homes built during the boom have created a drag on the current market as the owners surrender them to foreclosure. Builders cannot compete against relatively new construction offered by banks for large discounts.
The March sales numbers modestly exceeded analysts’ expectations but nevertheless did not impress. “Still miserable,” concluded Joshua Shapiro, chief United States economist for MFR Inc. While February sales were revised up to 270,000 from an initial 250,000, it was still the lowest of any month since records were first kept in 1963.
Builders told potential buyers in March that they might want to make a deal before new rates came from the Federal Housing Administration, which guarantees many loans. That probably contributed to the rebound.
In a separate report issued Monday, the HousingPulse Tracking Survey indicated that nearly half of the housing market is distressed properties. Because banks generally pulled back on foreclosures over the last six months, the survey underlined the long-term pressures facing the market.
If the banks start processing foreclosures faster, that will create further downward momentum on the housing market. A coalition of state attorneys general and the Obama administration is negotiating with the lenders to persuade them to do more loan modifications instead.
Home prices have been falling for the last six months, and the release on Tuesday of the Standard Poor’s Case-Shiller Home Price Index for February is expected to show another decline. Before that release, Morgan Stanley lowered its forecast for prices by an additional 4 percent. Morgan Stanley analysts now say prices will drop 6 percent to 11 percent from their levels at the end of last year.
The drop in home construction and sales is in some ways good news for would-be sellers, because it means new supply is not coming to a market that already has excess inventory. But lackluster construction is a drag on the larger economy, contributing to high unemployment and weak consumer spending.
It would take about seven months to find buyers for all the new homes now on sale, a period only slightly longer than normal. Builders are clearly skittish about anything for which they do not have a contract.
No relief is in sight.
“Sales remain very low by historical standards and, considering that a number of home builders reported large drops in orders recently, there is likely more weakness ahead,” wrote Jennifer Lee, senior economist at BMO Capital Markets.
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