- Purchases slump in western states to slowest since July 2014
- Median price eases from year ago as more properties for sale
Purchases of new homes in the U.S. unexpectedly declined in March for a third month, reflecting the weakest pace of demand in the West since July 2014.
Total sales decreased 1.5 percent to a 511,000 annualized pace, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey was for a gain to 520,000. In western states, demand slumped 23.6 percent.
Purchases rose in two regions last month, indicating uneven demand at the start of the busiest time of the year for builders and real-estate agents. While new construction has been showing limited upside, cheap borrowing costs and solid hiring will help ensure residential real estate continues to expand.
“The overall picture is still pretty good,” said Tom Simons, a money-market economist at Jefferies LLC in New York. The monthly swings in the new-house segment, a very small share of the market, “make it very hard” to get a definitive read from the headline numbers, he said. “As the labor market improves, people will be more willing to take risks and invest in housing.”
New-home sales, which account for less than 10 percent of the residential market, are tabulated when contracts get signed. They are generally considered a timelier barometer of the residential market than purchases of previously owned dwellings, which are calculated when a contract closes, typically a month or two later.
Economists’ estimates for new-home sales ranged from 488,000 to 540,000. February purchases were revised to 519,000 from 512,000. The monthly data are generally volatile, one reason economists prefer to look at longer term trends.
The report said there was 90 percent confidence the change in sales last month ranged from a 13.5 percent drop to a 16.5 percent increase.
Sales in the West declined to a 107,000 annualized rate in March after surging 21.7 percent the previous month to 140,000. In the South, purchases climbed 5 percent to a 314,000 pace in March, the strongest in 13 months. Sales in the Midwest advanced 18.5 percent, the first gain in three months, and were unchanged in the Northeast.
The median sales price decreased 1.8 percent from March 2015 to $288,000.
There were 246,000 new houses on the market at the end of March, the most since September 2009. The supply of homes at the current sales rate rose to 5.8 months, the highest since September, from 5.6 months in the prior period.
From a year earlier, purchases increased 5.8 percent on an unadjusted basis.
Borrowing costs are hovering close to a three-year low, helping to bring house purchases within the reach of more Americans. The average rate for a 30-year fixed mortgage was 3.59 percent last week, down from 3.97 percent at the start of the year, according to data from Freddie Mac.
The job market is another source of support. Monthly payrolls growth averaged 234,000 in the past year, and the unemployment rate of 5 percent is near an eight-year low. Still, year-over-year wage gains have been stuck in a 2 percent to 2.5 percent range since the economic expansion began in mid-2009.
The market for previously owned homes improved last month, climbing 5.1 percent to a 5.33 million annualized rate, the National Association of Realtors reported April 20. Prices rose as inventories remained tight.
Even so, the market is getting little boost from first-time buyers, who accounted for 30 percent of all existing-home purchases, an historically low share, according to the group.
Recent data on homebuilding has been less encouraging, although those figures are volatile month to month. New-home construction slumped in March, reflecting a broad-based retreat, a Commerce Department report showed last week. Home starts fell 8.8 percent to the weakest annual pace since October. Permits, a proxy for future construction, also unexpectedly dropped.