New-home sales tick up; still worst March ever
By David Streitfeld
New York Times / April 26, 2011
NEW YORK — The market for new homes is so depressed that even a rebound last month did not keep it from being the slowest March on record.
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 yesterday.
In March 2005, when a lack of sufficient income or savings was no deterrent to getting a dream home with granite countertops and a walk-in pantry, families and investors flocked to real estate at an annual rate of 1,431,000 houses.
The millions of homes built during the boom have created a drag on the current market as 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,’’ said Joshua Shapiro, chief US 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 kicked in from the Federal Housing Administration, which guarantees many loans. That probably contributed to the rebound.
In a separate report issued yesterday, the HousingPulse Tracking Survey indicated that nearly half of the housing market is distressed properties.
Because banks generally pulled back on foreclosures over the past six months, the survey underlined the long-term pressures facing the market.
If the banks start processing foreclosures faster, that will further stagger 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 past six months, and the release today 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 supply is not being added 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.
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.