New Home Sales Up, But Existing Sales Down
WASHINGTON-In news that surprised many, new U.S. single-family home sales rose during April, the second straight month of gains and prices increases, according to the Commerce Dept.
Commerce said sales increased 7.3% to a seasonally adjusted 323,000 unit annual rate, the highest level since December 2010, from a slightly upwardly revised 301,000-unit pace in March. All four regions of the U.S. reported gains in sales, with the West reporting a 15.1% rise. Among the other findings and observations:
• New home inventory in April reached the lowest level on record and builders continue to cut back on housing starts, which continues to put a drag on economic growth.
• The improving job market will support an overall upward trend in home sales going forward but it will take a long time for the housing market to fully recover.
• Sales were also up in all four regions during April. The West saw the largest increase by 15.1%, followed by the Northeast (7.7%), the Midwest (4.9%), and the South (4.3%).
• Despite the rise in April, all four regions saw declines in their year-over-year numbers. The South experienced the biggest drop in that category with 24.7% followed by the Northeast (22.2%), the Midwest (21.8%), and the West (20.8%).
• The inventory level in April was down from March's level of 7.2 months of supply to 6.5 months of supply. At the same time, the number of unsold homes declined from 180,000 units in March to 175,000 units in April and was down 19.4% on a year-ago basis.
• The median new home price, non-seasonally adjusted, rose by 1.6% from $214,500 in March to $217,900 in April and was up 4.6% from a year ago.
Still, the news isn't all good. The April 2011 home sales figures are down 23.1% from one year earlier. Moreover, many economists said the inventory of homes in the market continues to be a problem.
Meanwhile, while new home sales were up, the National Association of Realtors said existing home sales fell 0.8% in April to a seasonally-adjusted annual pace of 5.05 million homes, and the median sales price fell 5% to $163,700.
In its "Macro Data Flash" report, NAFCU said the decline was unexpected and indicates the the housing market remains weak, lagging behind ongoing economic recovery.
"While an overall upward trend in the existing home sales market is still expected for this year, setbacks like the one in April are very likely along the way," wrote Katrin O'Connor, NAFCU staff economist. "Tight credit conditions still make it difficult for many potential buyers to take advantage of the great affordability conditions."
It also means that the backlog of homes that are still working their way through the foreclosure process will keep potential buyers at bay. Moreover, once these homes are finally added to the existing inventory, NAFCU said, they further weigh down housing prices.
Ongoing Drag On Economy
Brian Turner, directory of advisory services at Southwest Corporate, agreed, writing in his "ReSources" analysis: "The housing sector continues to be a drag on the recovery, detracting from the nation's GDP growth for four of the past six quarters. GDP grew at an annualized rate of 1.8% during the first quarter of 2011," Turner wrote. "Meanwhile, the inventory of previously occupied homes listed for sale increased to 3.87-million units. At the current sales pace, that represents a 9.2-month supply, compared with 8.3 months in March. Most analysts perceive a six-month inventory as a healthy level."
Among the other findings from the NAR report:
• Home and apartment construction fell 10.6% from a month earlier and is down 23.9% from a year ago.
• Home sales fell in three of the country's four regions: down 7.5% in the Northeast, 1.6% in the West and 1% in the South. Only the Midwest (5.7%) was up.
Turner said most believe that the demand for new homes will continue to be weak through 2012 which normally would benefit existing home sales.