Purchases of new houses in the U.S. fell more than forecast in January, reflecting declines in the West and South that indicate a California tax credit and bad weather may have played a role.
Sales declined 13 percent to a 284,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease to a 305,000 rate. Demand dropped 37 percent in the West and 13 percent in the South.
Foreclosures will keep depressing prices, making distressed, previously owned properties more attractive to prospective buyers than new houses. Combined with unemployment at 9 percent and tight credit standards, home construction may keep lagging behind the rest of the economy this year.
“With a lot of new homes in areas with a lot of foreclosures and excess inventories, we would assume the new-home category would be the slowest to recover,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. Additionally, “new home sales are sensitive to weather, combined with the fact we saw a pop in December.”
The median estimate of 70 economists surveyed by Bloomberg News called for a decline to 305,000. Estimates ranged from 275,000 to 340,000. The Commerce Department revised December purchases down to 325,000 from a previously reported 329,000 rate, still the strongest pace since April.
Other reports today showed fewer Americans than forecast filed claims for unemployment insurance last week, and orders for durable goods climbed in January as demand for aircraft rebounded after plunging the prior month.
Applications for jobless benefits decreased by 22,000 to 391,000 in the week ended Feb. 19, according to figures from the Labor Department. Claims have fallen in three of the past four weeks, pushing down the monthly average to the lowest level since July 2008.
Bookings for goods meant to last at least three years rose 2.7 percent after a 0.4 percent drop in December that was smaller than previously estimated, according to data from the Commerce Department. Orders excluding transportation equipment unexpectedly dropped, reflecting a pattern of declines in capital goods in the first month of a quarter that’s been evident for the past three years.
The slump in sales in the West followed a 63 percent surge in December. Buyers in California could qualify for a tax incentive worth as much as $10,000 if they signed a contract between May 1 and the end of 2010. Sales of new houses are based on contract signings rather than closings.
Snow covered about 70 percent of the country in the middle of last month, according to the National Climatic Data Center. That may have also prevented buyers in the South from venturing out to new developments.
Purchases climbed 55 percent in the Northeast and 17 percent in the Midwest.
The median sales price rose 5.7 percent in January from the same month in 2010, to $230,600, today’s report showed. The increase in values probably reflects the change in the mix of sales toward the West where prices are generally higher.
The supply of homes at the current sales rate rose to 7.9 month’s worth from 7 months in December. There were 188,000 new houses on the market at the end of January, the fewest since December 1967.
Previously owned home purchases unexpectedly rose 2.7 percent to a 5.36 million annual rate in January as investors used all-cash offers to snap up distressed properties, figures from the National Association of Realtors showed yesterday. Existing house purchases are calculated when a contract closes.
Housing demand see-sawed last year, reflecting a boost from a national home buyer tax incentive of as much as $8,000 that gave way to a plunge in sales by mid-2010 as the credit ended.
With sales yet to show sustained strength, builders have cut back on the new-home supply. Housing permits fell 10 percent to a 560,000 annual rate in January, while an increase in starts was due to a 78 percent surge in multifamily units.
The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from a year earlier, the biggest 12-month decrease since December 2009, the group said this week. Prices were down 31 percent from their peak in July 2006.
The number of homes receiving a foreclosure notice will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac Inc., an Irvine, California-based dataseller, said last month.
Rising borrowing costs represent another hurdle. The average rate on 30-year fixed mortgages matched or exceeded 5 percent for a third period in the week ended Feb. 18, the first time that’s happened since April, the Mortgage Bankers Association said this week. Rates have been rising from a record low of 4.21 percent reached in October.
Homebuilders are still posting losses. D.R. Horton Inc., the second-largest U.S. homebuilder by stock-market value, on Jan. 27 reported a fiscal first-quarter loss that was wider than analysts expected.
“I don’t see anything in ‘11 that’s going to make ‘11 better than ‘10,” D.R. Horton Chief Executive Officer Donald Tomnitz said during a conference call the same day. “We need job growth, we need consumer confidence and we still have issues with qualifying people with tighter mortgage underwriting” standards.
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