US new-home sales plunge 14.5% in March

Last month's figure marks lowest annual pace since last July.

By MSN Real Estate partner Apr 23, 2014 6:33AM

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By Sarah Portlock and Ben Leubsdorf, The Wall Street Journal

 

The Wall Street JournalSales of newly built homes fell sharply in March, the latest sign of a faltering U.S. housing market that has struggled to maintain its momentum in the last year.

 

New-home sales dropped 14.5 percent from February to a seasonally adjusted annual rate of 384,000, the Commerce Department said Wednesday. February's rate was revised up slightly to 449,000.

 

March's figure was the lowest annual pace since last July and was below expectations. Economists surveyed by The Wall Street Journal had forecast sales would reach a 450,000 annual pace last month.

 

Sales of new homes represent a small portion of houses purchased in the U.S. and can be subject to large revisions. But the report provides a more up-to-date reading of the housing market than other gauges because it tallies sales at the moment a contract is signed rather than its closing.

 

New home sales had been trending up for much of 2011 and 2012 but have been more volatile over the last year. Would-be buyers have faced rising mortgage rates, surging house prices and stringent lending standards. Over the winter, unusually cold temperatures and snowstorms kept many construction sites closed.

 

March new-home sales were down 13.3 percent from a year earlier. The median price of a new home reached its highest level ever in March at $290,000, the report said, up 11.2 percent from February.

 

The spring buying and selling season is crucial for the U.S. housing market because families want to settle into a school district by the end of the summer. But recent data suggest a slow start so far this year.

 

Image: Home under construction © CorbisSales of previously owned homes, which account for more than 90 percent of total sales, fell slightly in March and were down 7.5 percent from a year earlier, according to a National Association of Realtors report earlier this week. NVR, which builds homes under the brands Ryan Homes and others, said its sales contracts signed in the first quarter were down 5.3 percent from the same period a year earlier.

 

A measure of home builder confidence rose slightly in April but remained below 50, according to the National Association of Home Builders. That's the dividing line between generally positive and generally negative comments.

 

Still, there are signs sales could pick up in the months ahead. Builders started construction on more homes for the second straight month in March, a separate Commerce Department report said last week. U.S. housing starts rose 2.8 percent last month, fueled by single-family home construction.

 

The Federal Reserve is expected to keep short-term interest rates near zero into 2015. But mortgage rates have risen in the last year since the central bank signaled it would begin pulling back its easy-money policies. A 30-year fixed-rate mortgage had an average interest rate of 4.4 percent at the end of March, up one percentage point from last spring, according to Freddie Mac.

 

The Commerce Department report Wednesday also found home sales plummeted in the Midwest, south and west but rose in the Northeast.

 

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