U.S. New Home Sales Reach Highest Level in Seven Years
March 25, 2015
Sales of newly built single-family homes increased 7.8% in February to annual rate of 539,000
WASHINGTON—New-home sales rose to the highest level in seven years in February, a sign of strong demand that could help boost the broader U.S. housing market.
Sales of newly built single-family homes increased 7.8% from a month earlier to a seasonally adjusted annual rate of 539,000, the Commerce Department said Tuesday. That is the highest level since February 2008.
Figures for the prior month were revised up to a rate of 500,000 from an initial estimate of 481,000. Sales haven’t consistently registered above 500,000 since the spring of 2008.
Many home builders have reported a strong start to this spring’s selling season and expect that momentum to continue amid strong job growth and mortgage rates holding at historically low levels.
At David Weekley Homes, a closely held builder operating in 11 states, sales orders in February and March are up 5% to 10% from the same period last year. Chief Executive John Johnson attributed the gain to better consumer confidence and low rates.
“There’s evidence that buyers who had been forestalling or delaying their decision are now comfortable enough to buy,” Mr. Johnson said in an interview. “And there’s some awareness that interest rates aren’t going to stay down forever.”
In the Phoenix area, Fulton Homes has doubled its sales orders in the first quarter from a year ago by marketing through radio and social media to buyers who have waited several years for their credit to recover after dealing with foreclosures.
Dennis Webb, Fulton’s vice president of operations, said such boomerang buyers now account for about a third of Fulton’s sales. All told, Fulton sold roughly 40 homes each month in the first quarter, compared with its year-ago rate of 20 a month.
“The frustrating thing is, our traffic was good last year, but the sales weren’t there,” Mr. Webb said. “This year, we’ve had good traffic, and the sales are there.”
Big, publicly traded builders also have seen sizable gains in sales. Lennar Corp., the No. 2 builder by closings, said last week that orders were up 18% in its quarter ended Feb. 28 from a year earlier.
New-home sales represent about one-tenth of the overall housing market, and monthly figures are frequently revised. February’s advance estimate came with a margin of error of plus or minus 15.2 percentage points.
Broader trends point to a sector constrained by limited inventory and fast-rising prices.
Sales of existing homes, which account for roughly 90% of all purchases in the U.S., increased 1.2% last month to a seasonally adjusted annual rate of 4.88 million, the National Association of Realtors said Monday. News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the NAR.
While a slight improvement from the prior month, the level remains below historical norms. The arrival of more new homes on the market could help boost sales across markets, though builders face challenges of their own.
In Oregon, demand is strong enough that Legend Homes Corp. is restricting the number of homes it sells to conserve its limited labor, materials and land. That is especially the case in land-constrained markets such as Portland. “There’s enough market to sell everything that I put together,” Legend President Jim Chapman said.
Legend, a closely held builder based in Portland, sold 10 houses a month in the first quarter, giving it “pretty strong” sales momentum in comparison to a year ago, Mr. Chapman said.
Tuesday’s data showed bad weather didn’t appear to hold back buyers last month. In the Northeast, sales of newly built single-family homes rose sharply to an annual rate of 43,000. Sales also increased in the South but declined in the Midwest and West.
Nationwide, sales were up 24.8% from a year earlier.
Meanwhile, new-home inventories tightened. At February’s pace, it would take 4.7 months to exhaust the supply of newly built homes on the market.
The median price of a newly built home stood at $275,500 in February, up 2.6% from a year earlier.
“The data support our view that the housing market remains in recovery mode and that activity for the rest of the year is likely to improve at a modest, albeit choppy, pace,” Blerina Uruci, economist at Barclays, said in a note to clients.
Source: Wall Street Journal