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TwitterDespite an extension of the federal credit meant to attract buyers the sale of new homes in the US fell slightly in February.
Sales slipped 2.2% to an annual pace of 308,000, seasonally adjusted, which is the lowest rate since the government began tracking the data in 1963, according to the Commerce Department. The rate of sales is down 13% compared February 2009.
Very high unemployment rates (9.7%), which is close to a 26-year high; and slightly tougher lending standards are believed to be the cause of low sales. Prospective buys may also be getting discouraged to buy just now since they may be expecting prices to fall further still. To some extent, poor weather in early 2010 may also hurt home sales, though a downward trend has been evident since last fall. “We can cite the weather but Mother Nature can’t be entirely blamed for this report,” economist Jennifer Lee of BMO Capital Markets said in an email.
New House sales drop slightly in February
The number of new homes on the market rose 1.3% in February to 236,000. At February’s rate of sales, it would take 9.2 months to sell all the inventory, compared to 8.9 months in January and 7.3 months last October.
It is also interesting to note that the information collected by the federal government is not always reliable month to month so, according to the Commerce Department it may take up to five months to establish a statistically significant trend in sales. In the five months from February 2010 back to October 2009, the sale of new homes fell to a seasonally adjusted average of 346,000 from 363,000 – which is evidence of weak housing market.
Also, although sales of new homes rose modestly in the first half of 2009, they leveled off last fall despite low interest rates and cheap prices. Nationwide, houses cost 75% or less compared to just three years ago. Analysts had expected that the extension of tax credit for first time buyers would lift new home sales, but it doesn’t seem to be so. Though buyers could still clamp up sales in the next two months, overall, the market is expected to remain subdued.
The consequence is that builders have also become cautious and have put in new constructions on the back burner. In February, the number of homes for sale that are under construction inched up to 102,000. It matched a record low of 101,000 in January. The inventory of unsold homes, meanwhile, totaled 236,000 in February – barely above a 38-year low.
Area-wise, the biggest drop in sales took place in the Northeast, which experienced a 20% decline. New-home sales also fell in the Midwest (-18.0%) and the South (-4.6%). All of those areas experienced major snowstorms in January or February. Sales rose 20% in the West, the hardest hit housing market in the U.S., according to government data.
“Americans remain downbeat on the housing market,” said David Semmens, an economist at Standard Chartered Bank in New York, who forecast a 300,000 sales pace. “We expect the continuation of poor sales to lead to a resumption of downward price pressure.”
“Going forward, we don’t expect housing to rise at a blistering pace, though it is likely not to fall off a cliff either,” strategist Ian Pollick of TD Securities said in an email.
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