Housing Bubble Bust or Soft Landing - March Homes Sales Figures Up

Information on March figures for both existing and new house sales were released this week and figures show a moderate slowing from similar data one year ago but with a gradual upswing from first quarter 2006 figures. This might indicate that "The Spring Market" is still alive and well.

Existing home sales figures are derived from data collected by the National Association of Realtors (NAR), while the monthly report on new home sales comes from figures jointly compiled and released by the U.S. Census Bureau (Department of Commerce) and the U.S. Department of Housing and Urban Development.

New home sales of single family residential units in March of this year were at a seasonally adjusted annual rate of 1,213,000; 13.8 percent above the revised February figure of 1,066,000 but down 7.2 percent from the estimate in March 2005 of 1,307,000.

New home sales increased in every region except the West. That region strongly skewed national statistics with sales in that region up 35.7 percent from February. The Northeast was up 4.7 percent for the month and the Midwest and South showed growth of 10.9 and 6.9 respectively.

The Northeast showed the greatest percentage decline in sales since March 2005. Sales in the region were off 15.2 percent over the year but the West also showed a double-digit slump, dropping 13.1 percent since last year at this time. Sales in the Midwest were down 8.9 percent and 2.3 percent in the South.

The inventory of new homes available for sale dropped from a 6.3 months supply in February to 5.5 months in March, a decline of 12.7 percent. The inventory, however, was 31 percent higher than one year ago when available houses were expected to sell in 4.2 months at the then current rate of consumption.

Existing homes also sold better and faster in March than in February, adding to the strong rebound noted that month according to figures released this week by NAR.

On an annualized basis 6.92 million existing homes, a category that includes single-family residences, townhouses, condos, and coops, sold in March. This is a rate that was 0.3 percent higher than the 6.90 million reported in February but 0.7 percent below the 6.97 million in annualized sales one year ago.

NAR's chief economist David Lereah said that the fact that the March figures were "holding close" to the numbers recorded in the strong rebound a month earlier "is additional evidence that we're experiencing a soft landing. We may see some minor slowing in home sales as interest rates rise, but the market is clearly stabilizing." He stated that he expects this year to be the third strongest year on record for home sales.

Existing home sales figures on a regional basis did not mirror those of new home sales. The strongest region for existing homes was the Northeast which was up 1.7 percent from last month and the Midwest, up 1.2 percent. The West and the South were both down 0.7 percent. While national sales were down from one year ago, the brunt of that decline was borne by the West which dropped 12.3 percent. All other regions were up from 1.5 to 3.8 percent.

NAR reported that the median price of new homes sold in March was $224,200 and the average price was $279,100, an increase of 7.4 percent and 4.7 percent respectively. However, except in the West, median prices were either static or down slightly ($1,000 to $6,000) from February Average prices, on the other hand were unchanged in the South but up $2,000 to $6,000 in the other regions.

It is well to remember when looking at this data that sales figures of both new and existing homes reflect transactions that were, in most cases, put in place a minimum of six weeks ago and, in the case of new homes, perhaps with after much longer lead date. Still it is encouraging to see that property is still moving at a relatively brisk pace some 15 months after interest rates began their sporadic growth from record low figures.