Nationwide purchases of new homes rose in March, for the first time this year, as sales incentives and unusually warm weather brought out more buyers.
Sales rose 2.6 percent to an annual pace of 858,000 from an 836,000-units-per-year rate in February that was lower than previously reported, the U.S. Commerce Department said last Wednesday in Washington, D.C. The supply of unsold homes at the current sales pace declined.
The gain may be more a reflection of higher-than-normal temperatures in March than a sign of a recovery in demand, economists said.
The National Association of Realtors had reported last Tuesday that sales of existing homes dropped in March by the most since 1989. Those sales were largely based on contracts signed in February, when winter storms dissuaded buyers.
“Considering the weather was unseasonably mild in March, the report certainly wasn’t overly positive news and is consistent with the idea that sales are still struggling,” said Phillip Neuhart, an economist at Wachovia Corp. in Charlotte, N.C. “We don’t see sales bottoming until sometime midyear.”
A separate government report last Wednesday showed that durable-goods orders rose more than forecast in March, signaling a revival in business spending. Orders for goods that last several years increased 3.4 percent, after a 2.4 percent gain in February that was larger than previously estimated. Orders excluding transportation equipment rose 1.5 percent after a 0.4 percent drop.
After the reports, the yield on the benchmark 10-year U.S. Treasury note was unchanged, closing Wednesday at 4.62 percent, but stock prices closed higher.
New home sales had been expected to rise to an annual rate of 890,000 in March from a previously reported 848,000 in February, according to the median of 71 projections in a Bloomberg News survey of economists. Estimates ranged from 820,000 to 1.1 million.
The median price of a new home rose 6.4 percent last month to $254,000 from $238,800 a year earlier, the report showed.
The number of homes for sale at the end of the month rose to 545,000 from 544,000 in February. That left the supply of homes at the current sales rate at 7.8 months’ worth, compared with 8.1 months in February, which was the highest in 16 years.
The number of homes completed and awaiting a buyer declined by 1,000 to 178,000 last month.
The reported inventory of new homes may be understated because the government data doesn’t include cancellations, economists said.
Warm weather also contributed to an unexpected increase in housing starts in March. Builders broke ground on homes at a 1.518 million annual rate, up 0.8 percent from February, a government report showed last week. Building permits, a sign of future construction, also rose 0.8 percent.
Sales of existing homes, which account for 85 percent of the housing market, tumbled 8.4 percent in March, the National Association of Realtors said last Tuesday. Sales fell to a 6.12 million annual rate, the lowest since June 2003.
New-home sales are considered a more timely measure of the market because they are recorded when a contract is signed; most sales of existing homes are counted when a contract closes, usually a month or two later.
Purchases rose in two of four regions. They jumped 50 percent in the Northeast to an annual rate of 72,000, and 9.8 percent in the Midwest to 134,000. They declined 2.7 percent in the South to 436,000 and 0.9 percent in the West to 216,000 units per year.
Compared with a year earlier, new home sales were down 23.5 percent, the report showed.
Home construction in the fourth quarter fell by the most in 15 years, shaving 1.2 percentage points from economic growth.
Federal Reserve policy makers, who kept their key interest rate unchanged for a sixth time last month, predicted a “moderate” pace of economic growth and said demand for housing was leveling out. They said that subprime mortgage defaults were a risk to the outlook, according to minutes of their meeting.
“We do see some stabilizing in demand in the housing market,” said Frederic Mishkin, a member of the Federal Reserve Board of Governors. “There are indications that the market could be working off some of this higher inventory.”
Builders were less optimistic. The National Association of Home Builders/Wells Fargo index of sentiment fell in April to the lowest level of the year, according to a report last week, as measures of sales and buyer traffic declined. Builders surveyed said they were concerned that an increase in mortgage defaults is resulting in tighter lending standards that are discouraging would-be buyers.
And D.R. Horton, the second-largest U.S. homebuilder, said orders for the three months ended March 31 dropped 37 percent and closings fell 22 percent.
“I don’t think the market is stabilizing,” D.R. Horton Chief Executive Officer Donald Tomnitz said on a conference call. The housing markets in California, Florida and Arizona “are becoming tougher,” he said.
Builders are cutting prices and adding incentives like kitchen upgrades to lure buyers.
There are signs, however, that demand may be picking up. Applications for mortgages to buy homes have risen five of the past eight weeks, according to Mortgage Bankers Association data.
Brian Louis contributed to this story
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