Today’s government report that new-home sales fell 16.6 percent in January, to the lowest level in four years, only added to the confusion about the real estate market.
Tuesday saw a pair of sunnier reports: the National Association of Realtors reported that sales of existing U.S. homes rose 3 percent in January to the highest level in seven months, and the Mortgage Bankers Association said its mortgage applications index rose a seasonally adjusted 3.6 percent in the week ended Feb. 23.
Though the existing-homes data appears to indicate an upswing that is not yet reflected in new-home sales, the latter measure is usually considered more timely. New-home contracts are registered at the time of signing; existing-home sales are noted at the time of closing, often a month or more after the contract is signed.
Yet a report last week by the American Institute of Architects said another leading indicator for the housing market, the AIA’s Architecture Billings Index, rose 57.9 points in January from the December high of 57.6. (Any value above 50 indicates expansion.) Since demand for design services usually leads construction by nine to 12 months, and has risen sharply in the past three months, the AIA’s forecast for the building industry is a sunny one.
The news from developers remains bleak. New Jersey-based Hovnanian Enterprises Inc. yesterday reported a 23-percent drop in home contracts and an order-cancellation rate of 36 percent for its first quarter, Bloomberg News said. Homebuilder Toll Brothers last week posted a 67-percent drop in first-quarter profits and pared its forecast for home sales this year.
And the increase in housing inventory reported today by the U.S. Census Bureau and U.S. Department of Housing and Urban Development – to 6.6 months’ worth at the current rate of sales, the highest level since October – is likely to cause more builders to cut back their housing construction plans. “The inventory situation is undoubtedly worse than reported,” Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn., said in a note to clients that was cited today by Bloomberg News. “Builders will probably have to continue to work off bloated stocks of finished homes for most of 2007.”
Yet Federal Reserve Chairman Ben S. Bernanke, among others, has said the worst of the nation’s housing slump is over. “The U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes,” Bernanke told Congress earlier this month during his semi-annual monetary policy presentation, Bloomberg said.
