On Thursday, the Commerce Department revealed that the U.S. new-home sales dropped by 11.4 percent this March from February, reports Los Angeles Times. Thus, the seasonally adjusted annual sales pace fell to 481,000 units from the previous impressive rate of 543,000 in February, which was the record high in new home-sales for seven years, since February 2008.
New-home sales which roughly represent 8.5 percent of the housing market, posted three-straight months of increase before these new data in March, notes Reuters. The site also revealed that the current sales was the biggest decline in more than 18 months. Although economists from the outlet predicted that the sales will go down in March, they only forecasted it to fall at an annual sales pace of 513,000-unit pace last month.
Reuters notes that most regions showed a decline in sales, but it was most pronounced in the Northeast, having a 33.3 percent drop, followed by the South which fell by 15.8 percent -- it was the region's largest drop from July 2013 -- and the West, that went down by 3.4 percent. Only the Midwest region posted a rise in its new-home sales by 5.9 percent.
Meanwhile, existing home sales jumped by 6.1 percent in March, the highest sales increase since December 2010 (6.2 percent), reports the National Association of Realtors. The increase in sales made the seasonally adjusted rate equal to 5.19 milion, the highest annual rate in 18 Months, as compared to only 4.89 million in February. The association noted that all regions posted a sales increase for existing home sales -- Northeast (6.9), Midwest (10.1), South (3.8), and West (6.3).
The recent existing home sales data brought the unsold housing inventory down to 4.6 months supply in March, notes Reuters. With six months of remaining supply as the perceived healthy value by economists, the increase in existing home sales just tightened the supply further. This means, prices could go up, and would make newly-built homes, although priced higher too, should be the more viable option for home buyers, says Reuters. Thus, this recent recorded drop in March for new-home sales may only be a slight setback, and may also increase, as the spring season selling heats up even more.
The tight supply creates a 7.8% yearly rise in March's median price which was unsustainable, says Lawrence Yun, NAR chief economist, as reported by The Wall Street Journal. "This price gain of near 8% is not healthy, considering people's incomes are only rising by 2%. The only way to relieve housing cost pressure is to have more homes coming onto the market," said Mr. Yun.
With that in mind, builders should be encouraged to build more.
