New home sales fell an unexpected 3.8% in February, suggesting that the lowest mortgage interest rates of the decade have yet to translate into a buying surge.
But housing industry officials said sales are already picking up dramatically with the beginning of the traditional spring home-buying season.
In a report Monday, the Commerce Department said new single-family homes sold at a seasonally adjusted annual rate of 685,000 in February, down from 712,000 units in both January and December. It was the largest decline since a 6.5% drop in October and left sales only 1.3% above last February's pace.
Government and private analysts blamed hard times in the Southern energy industry regions of the country and unusually harsh weather in the Northeast and Midwest for much of the decline.
The February figures "suggest that the markets are not responding as quickly to the lower mortgage rates as people had expected," said David Wyss, chief economist for Data Resources, an economic forecasting service. "And that's bad news.
"There are a lot of houses being started and not sold," Wyss added.
While selling at a slower pace, the price of the average new single-family home rose last month to $106,300, up from $102,400 in January. The median price--the point at which half the houses sold for more and half for less--was $87,300 in February, up from $86,000 a month earlier.
New home sales fell in all regions of the country except the West, where they were up 24.8%. The largest decline was in the South, a region that includes Texas.
Warren Lasko, executive vice president of the Mortgage Bankers Assn., called the report "a bit disappointing."
"Interest rates had already started down in February. It appears that home buyers must have waited (until) March to make their purchase," Lasko added. He said preliminary indications point to a rapid increase in home sales in the past few weeks.
In the 10% Range
Rates on conventional fixed-rate mortgages have fallen to about 10%--and less in some parts of the nation--for the lowest levels since mid-1978. Rates on Veterans Administration and Federal Housing Administration mortgages are currently at 9.5%.
James Christian, chief economist for the U.S. League of Savings Institutions, said: "It's pretty clear, when you look at the composition of the sales, that the big decline is in the South, most particularly in the oil patch. Oil giveth and oil also taketh away.
"But the prime buying season is really late March, April, May and June. And it's starting to look very solid," he added.
Michael Sumichrast, chief economist for the National Assn. of Home Builders, dismissed the significance of the decline. "I don't get excited over one month. We had so many rainy days in February," he said.
"March and April are going to be great. Builders are telling us that sales are the best they've had since 1981," he added.
February's decline followed two months in which the pace of home sales remained the same at 712,000 units. Sales last rose in November, when they were up 13.3%.
January's levels initially had been reported as a 4.4% rise in sales. But subsequent revisions showed that sales in January held at the same level as in December instead of increasing.
The Commerce Department said the February decline left 356,000 unsold houses--equivalent to a supply of 6.4 months.
In a related report pegged to existing home prices, the National Assn. of Realtors said Monday that housing affordability during the last three months was "better than any other time during the last seven years."
The trade association said its affordability index, which measures median house prices against median income levels, was 100.3 for February--the third consecutive month the index has been above 100. In January it was 101.0 and in December 100.2.
A level of 100 is the point at which a family earning the median U.S. income--$28,168 last month--can afford a mortgage covering 80% of the median price existing home. The February index meant that this family had 100.3% of the income needed to qualify for a $62,000 mortgage, which is 80% of the median $77,700 resale home price.
Before December, the last time the index was above 100 was in 1978.