In areas such as San Diego where home inventory has been drastically low, the call for new-home construction has been resounding, however it seems that even with the need for more homes, new-home sales are having trouble getting off the ground. According to the Commerce Department, new-home sales plummeted 11.4 percent in March, coming to a seasonally adjusted annual rate of 481,000.
The Northeast and South regions of the country saw the sharpest declines of 33.3 and 15.8 percent respectively, while the West fell only about 3.4 percent. The Midwest was the only region to post an increase with new-home sales rising 5.9 percent. The declining regions represent a total reversal of strong conditions seen in February. That month saw the strongest performance in new-home sales seen in seven years with an upwardly revised annual sales pace of 543,000.
“After two robust months of new home sales, some readjustment is inevitable,” said David Crowe, chief economist of the National Association of Home Builders (NAHB). “This is the best first quarter since 2008, and attractive mortgage rates and pent-up demand should keep the market moving in the right direction.”
Although sales are slow, the inventory of new homes is looking very strong for the busy spring selling season. There are about 213,000 new homes for sale in March, which is a 5.3-month supply at current sales pace. Given the 4.6-month inventory level the National Association of REALTORS® reported for existing-home sales, it seems new homes might be on-par to help accelerate home sales through the remainder of spring.
Builders Look Forward to Busy Home Buying Season
Despite the slow start to the spring season, many builders are remaining optimistic for what the remainder of the season will bring. The National Association of Home Builders/Wells Fargo Housing Market Index rose four points in April to a level of 56. This survey, which gauges builders’ perceptions on current and future single-family home sales, uses 50 as its break-even point with higher values indicating a positive outlook.
“The HMI component index measuring future sales expectations rose five points in April to its highest level of the year,” said NAHB Chief Economist David Crowe. “This uptick shows builders are feeling optimistic that the housing market will continue to strengthen throughout 2015.”
It seems many builders are confident that the market can sustain an increase in new homes and are willing to increase their activity in order to serve eager home buyers.
“As the spring buying season gets underway, home builders are confident that current low interest rates and continued job growth will draw consumers to the market,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Missouri.
Regionally, the West actually dropped three points, but its index level of 58 remained the most positive index of all recorded regions in the country.
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