Behind the Numbers: The Vanishing Housing Recovery?

Associated Press
Sales of new homes in the U.S. fell for the second consecutive month in February

Wait, what happened to that housing-market recovery?

Just a few days ago, it sure seemed like the housing market was coming back from a colossal bust. But the latest government statistics seem to say that’s not the case for the new-home market.

Sales of new homes in the U.S. fell for the second consecutive month in February. They decreased by 1.6% to a seasonally adjusted annual rate of 313,000 from January, the Commerce Department said Friday. It was the second-straight monthly decline and the lowest reading since October 2011.

However, new-home sales were up 11.4% compared with February 2011. And prices have stabilized: The median price of a new home was $233,700 last month, up 6.2% from February 2011.

The market for new homes has been weaker than the market for previously occupied homes. New-home sales have risen about 13% from August 2010, which saw the lowest level on record. Meanwhile, sales of previously occupied properties have climbed 35% from their July 2010, the lowest level in more than a decade.

Only 150,000 new homes were listed for sale at the end of February. That was equal to January and the lowest on records dating to 1963.

The supply would take 5.8 months to deplete at the current sales pace — a level considered healthy by economists. Only 54,000 new homes were completed in February, the lowest recorded level.

Here’s how industry watchers saw the results:

Patrick Newport, U.S. economist, IHS Global Insight: “According to the press release, new home sales slipped in February by 1.6%, plus or minus 23.9%. Not surprisingly, this estimate was not statistically significant. Indeed, most of the numbers in the report fail the significance test. Still, it is always reassuring when these numbers are pointing up and disconcerting when they are pointing down. The weak numbers (assuming they are more or less correct) raise a crucial question. If new homes are not selling, then why are builder confidence and single-family housing permits moving up, and why is the S.& P. home builder index up 80% since last October? Time will tell if builders and investors have gone out on a limb.”

Peter Newland, economist, Barclays Capital:  ”While home sales have remained at low levels and moved broadly sideways since the end of the recession, the more interesting story has been the steady decline in the supply of new homes for sale. Months’ supply edged up to 5.8 months in February from 5.7 in January, but remains close to a six-year low indicating that, even though the pace of sales is relatively weak, it has been sufficient to put downward pressure on the stock of inventory. This, in time, should support new construction.”

Paul Diggle, property economist, Capital Economics: “New-home sales are still being hampered by stiff competition from heavily discounted foreclosures and short sales. The average new home is 30% more expensive than its pre-owned equivalent, twice the historical average. But let’s not lose sight of the underlying improvement that has been in place for six months or so now. Relative to August last year, well before the good weather began, new home sales have risen by 7.9%. That sits comfortably with the broad upward trends in other measures of housing market activity such as existing home sales and housing starts. Looking ahead, the pickup in jobs growth, the slight easing in credit and the backdrop of ultra-favorable valuations should all help to re-establish a gradual upward trend in new home sales later this year.”

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