US new home sales fall in February

US new home sales fall in February

Construction workers build a single family home in San Diego, California
FILE PHOTO: Construction workers build a single family home in San Diego, California. REUTERS/Mike Blake

WASHINGTON: Sales of new US single-family homes fell in February after surging in the prior month, and could decline further because of the coronavirus pandemic which is boosting unemployment and severely disrupting economic activity.

The Commerce Department said on Tuesday (Mar 24) new home sales dropped 4.4 per cent to a seasonally-adjusted annual rate of 765,000 units last month. January's sales pace was revised sharply higher to 800,000 units, which was the highest level since May 2007, from the previously reported 764,000 units.

Economists polled by Reuters had forecast new home sales, which account for more than 10 per cent of housing market sales, declining 2.0 per cent to a pace of 750,000 units in February.

"We expect new home sales to fall more sharply in March and decline nearly 10 per cent in the second quarter," said Gregory Daco, chief US economist at Oxford Economics in New York. 

"Low mortgage rates and pent-up demand will be supportive of housing when a recovery is underway, but severe job losses and damage to household confidence may make a quick bounce back difficult."

New home sales are drawn from permits and tend to be volatile on a month-to-month basis because of a small sample. Sales jumped 14.3 per cent from a year ago.

The coronavirus has brought much of the United States to a halt as state and local governments enforce "social distancing" policies aimed at containing the highly contagious virus, virtually closing all restaurants, bars, cinemas and theaters.

The government reported last week that the number of Americans filing claims for unemployment benefits jumped 70,000, the most since 2012 to a two-and-a-half year high of 281,000 during the week ended Mar 14. 

Economists are predicting claims will accelerate to a record 1.5 million or more when last week's data is published on Thursday.

The Federal Reserve on Monday rolled out an extraordinary new array of programmes aimed at blunting the "severe disruptions" to the economy caused by the coronavirus outbreak, backstopping an unprecedented range of credit for households, small businesses and employers. 

The US Congress was on Tuesday close to reaching a deal on a US$2 trillion stimulus for the economy.

Last month, new home sales fell 7.3 per cent in the Midwest and tumbled 17.2 per cent in the West. They soared 38.9 per cent in the Northeast and rose 1.0 per cent in the South, which accounts for the bulk of transactions.

The housing market has regained its footing as mortgage rates have declined after hitting a soft patch beginning in the first quarter of 2018 through the second quarter of 2019.

Reports last week showed existing home sales hit a 13-year high in February. Single-family homebuilding, which accounts for the largest share of the housing market, increased in February to the highest level since June 2007.

Completions of single-family housing last month were the highest since December 2007, and the inventory of homes under construction rose to levels last seen in December 2006.

That could help to ease a shortage of homes that has constrained sales. The median new house price increased 7.8 per cent to US$320,000 in February from a year ago.

Sales last month were concentrated in the US$200,000-US$749,000 price range. New homes priced below US$200,000, the most sought after, accounted for 11 per cent of sales.

There were 319,000 new homes on the market in February, down from 322,000 in January. At February's sales pace it would take 5.0 months to clear the supply of houses on the market, up from 4.8 months in January.

Source: Reuters