Interest Rate Roundup

Wednesday, March 25, 2009

New home sales rise 4.7% in February

Yesterday's existing home sales report wasn't too bad. Did the new home market fare as well? Let's go to the videotape ...

* New home sales rose 4.7% to a seasonally adjusted annual rate of 337,000 from an upwardly revised 322,000 in January. That was better than the average forecast of economists surveyed by Bloomberg, who were looking for a reading of 300,000.

* The raw number of homes for sale continued to decline, falling to 330,000 from 340,000 in January. The months supply at current sales pace indicator of inventory declined to 12.2 from 12.9.

* The median price of a new home dropped again, by 2.9% to $200,900 from $206,800 in January. That was also a decline of 18.1% from $245,300 in the year-earlier period, the biggest drop ever. New home prices are now at the lowest level since December 2003 ($196,000).

When prices fall far enough, people buy houses. That's the message coming through in the latest numbers. New home sales rose for the first time since July, aided by the biggest year-over-year decline in home prices in U.S. history. New home prices are now at the lowest level in just over five years, and likely to head even lower in the months ahead. But those lower prices -- and a drastically reduced pace of construction activity -- are clearly helping eliminate the overhang of new home inventory. The raw supply of new homes on the market is now the lowest going back to June 2002 and roughly in line with the long-term average.


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