After a staggering 74 percent decline from the peak in July 2005, new U.S. home sales appear to be bottoming out.
The pace of home sales, which hit a record-low in January, jumped in February and was flat in March, the Commerce Department said Friday. At the same time, the inventory of new homes for sale dropped a badly needed 5 percent from February levels.
“We believe that the bottom is at hand and that sales will begin turning in the second half of this year,” wrote IHS Global Insight economist Patrick Newport. “As previous recessions show, demand for new homes does not evaporate altogether, even in the hardest of times.”
New home sales fell just 0.6 percent in March to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000. February’s results were adjusted upward by more than 6 percent.
The report shows the slide in demand for new homes is ending after more than 40 months of decline, wrote David Resler, chief economist with Nomura Securities.
“Sales and starts are at extremely low levels,” he wrote in a note to clients. “But, probably having bottomed, they have nowhere to go but up.”
That’s not yet the case for prices.
The median sales price fell to $201,400, a 12 percent drop from a year earlier. The median price is the midpoint, which means half of the homes sold for more and half for less. Prices are likely to remain weak for months as builders continue to clear out their stock of unsold homes.
Sales varied dramatically around the country. The best performance was in the West, where sales rose more than 15 percent from February. The worst turnout was in the Northeast, where sales sank more than 32 percent. They were unchanged in the South, and down nearly 8 percent in the Midwest.
Since the data measures signed contracts to buy new homes rather than completed sales, they probably got a boost from the new $8,000 tax credit for first-time buyers passed in mid-February. In addition, California offers a $10,000 state tax credit for buyers of new homes, and that’s likely boosting sales in that state.
An index of builders’ confidence released earlier this month posted its biggest one-month jump in five years as many homebuyers seized on lower prices and incentives and took advantage of lower interest rates and tax credits.
“There are some buyers beginning to come back into he market,” David Crowe, the trade association’s chief economist said Friday.
Demand for new homes appears to be recovering faster than demand for previously occupied homes. In March, sales of existing homes fell 3 percent to an annual rate of 4.57 million from a downwardly revised pace of 4.71 homes in February, the National Association of Realtors said Thursday.