Sales of new single-family homes fell during March, a signal housing activity could be cooling from the red-hot pace at the start of the year.
New home sales dropped 5.0 percent last month to an annual rate of 828,000 units, the Commerce Department said. In February, home sales rose a revised 3.0 percent to an 872,000 pace, initially reported as a 4.8 percent rise to a record 893,000 rate. Before the most recent report, analysts expected March sales to decline 2.5 percent to an 871,000-unit rate.
Although the trend for housing activity is still positive, the March slump in new home sales could be a signal that activity is set to cool, analysts said.
February’s pace “could serve to be the peak for a while,” said Christopher Rupkey, economist at Bank of Tokyo-Mitsubishi in New York, before the report. “Mortgage rates have backed up and that could have a dampening impact by midyear if rates don’t come back quickly.”
Still, the sharp decline during March doesn’t “tell the final story on what’s happening with housing. We’ll need another month’s worth of data,” Rupkey said.
New home sales fell in the South, West and Midwest and were unchanged in the Northeast. In the South, new home sales fell to an annual rate of 334,000, the lowest since October 1996.
The report also showed the supply of new homes rose to 4.3 months during March from a 3.9-month supply in February.
The average price of a new home rose to a record $183,500 in March from February’s $179,600.
The average rate on a 30-year fixed mortgage averaged 7.13 percent in March, compared with 7.04 percent during February, according to Bloomberg analytics. For the week ending April 17, the average rate rose to 7.17 percent.
While mortgage rates have edged higher, they remain attractive for buyers, analysts said.
U.S. mortgage applications increased last week as mortgage rates held as favorable levels, the Mortgage Bankers Association of America said.
The vibrant housing market propelled first-quarter earnings by nearly nine-fold at the nation’s largest home builder, Pulte Corp. The Bloomfield, Michigan-based builder said profits rose to $10.9 million, or 50 cents a diluted share, from $1.23 million, or 5 cents in the year earlier period.
Also, contract signings at Toll Brothers reached their 28th consecutive quarter-over-quarter record during their fiscal first quarter ending in January. Contract signings serve as leading indicator of how many houses have yet to be built.
“Our contracts were up 56 percent in the first quarter ending in January, and our deposits are running 25 percent to 35 percent per week above last year’s second quarter ending in April,” said Joel H. Rassman, chief financial officer, senior vice president and treasurer of Toll Brothers Inc. in Huntingdon Valley, Pennsylvania.
Underscoring the robust housing market, sales of previously owned homes unexpectedly rose 2.5 percent to a record 4.89 million-unit annual rate during March, the National Association of Realtors said last week. The increase suggests new homes sales will be strong as most home owners who sell a house trade up to a new one.
Meantime, ground-breaking for the construction of new homes during March, while cooling a bit from a month earlier, were at their second-highest level since January 1989. Housing starts fell 2.8 percent last month to a 1.590 million-unit rate.
The stronger the housing market, the more inclined home buyers are to buy other goods, such as appliances and home furnishings. In March, orders placed with manufacturers of durable goods such as washing machines and microwave ovens rose 0.4 percent. Excluding transportation equipment, big-ticket orders jumped 0.9 percent to a record level, the Commerce Department said Tuesday.
