Are Home Sales Signaling Trouble for the Housing Recovery?
The real estate market continues to struggle with a variety of issues, as sales of new single-family homes in the United States fell to their worst level in five months. The frigid weather conditions often receive most of the blame, but low inventory levels and affordability issues are still hindering the market.
On Tuesday, the U.S. Census Bureau reported that purchases of new homes, measured by contracts signed, declined 3.3 percent to a seasonally adjusted 440,000-unit pace in February, compared to the downwardly revised January rate of 455,000 units. It was the weakest month for new home sales since September. Home sales were also 1.1 percent below the February 2013 level.
The results were worse than expected. On average, economists estimated home sales to come in at a 445,000-unit pace. Sales have struggled this winter. In December, new-home sales logged their biggest miss of expectations since July. Sales have declined in three of the past four months. On the positive, a total of 428,000 single-family homes were sold in 2013 — the best year since 2008.
After making a seven-month high in January, new-home sales in the Northeast plunged 32 percent to an annual pace of 23,000 units, while the South region held relatively steady. However, sales in the Midwest jumped almost 37 percent despite concerns about the cold weather. The West, which cannot use the excuse of cold weather, witnessed a 16-percent drop in new home sales. The median sales price of new houses sold in February was $261,800, and inventory remained low, at 5.2 months.
Housing affordability issues kept many people on the sidelines. First-time buyers accounted for only 28 percent of purchases last month, up from 26 percent in January but down from 30 percent a year earlier, according to a separate report from the National Association of Realtors. January was the worst showing for first-time buyers since the NAR started keeping track of the measurement in October 2008. A normal reading would be closer to 40 percent.
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