March new home sales a disaster
* Sales plunged 8.5% to a seasonally adjusted annual rate of 526,000 in March from a revised 575,000 in February (previously reported as 590,000). That was much worse than the forecast of 580,000 home sales. From a year earlier, sales tanked 36.6%. That leaves them at the lowest since October 1991 (524,300).
* The supply of homes for sale dipped again to 468,000 from 473,000 a month earlier and 548,000 a year earlier. But because the pace of sales fell much faster, the months supply at current sales pace indicator of inventory ballooned to 11 months from 10.2 a month earlier. That's the highest since September 1981 (11.3 months).
* Median home prices dropped 6.8% on the month to $227,600 from $244,200 a month earlier. They year-over-year drop was a hefty 13.3%, the worst decline of the down cycle and the biggest drop since July 1970 (-14.6%).
When you get numbers like these, it's hard to find words to describe them. Awful? Atrocious? Take your pick. New home sales fell to their lowest level in more than 16 years. Prices were in veritable free fall. And while the absolute number of homes for sale dipped, sales fell even faster, causing the "months supply at current sales pace" supply indicator to worsen.
Of course, this is March data -- and we all know that was the month where the credit markets imploded. The key question is whether a turning point has been reached. Have lenders finally put the worst losses behind them? Will the trend toward tightening mortgage standards reverse? Are government (and Federal Reserve) efforts to stabilize the market working?
We won't know the answer for a while, and I'm not convinced that's the case yet. April and May data will give us a clearer picture. In the meantime, a new threat has emerged in the past few weeks -- rising interest rates. Both long-term Treasury yields and long-term mortgage rates have started to climb. That has helped send the Mortgage Bankers Association's purchase index to within a hair of its 2008 lows. This development bears watching in the weeks ahead, because the last thing potential home buyers need is higher financing costs.