NEWS ANALYSIS : Why Sales of Homes Fell 14.8% : Economy: Analysts blame rising mortgage rates and good weather for a surprising plunge in March.
Rising mortgage rates, unusual weather and a failed tax proposal are among the factors being blamed by experts for last month’s surprisingly steep drop in sales of new homes.
Overall new-home sales fell 14.8% in March, with the declines concentrated inthe Northeast and West, the government said Tuesday.
The balmy winter weather in parts of the East and Midwest, analysts said, may have lured buyers who traditionally would have waited until spring to purchase a home.
The variety of factors that apparently spooked potential home buyers in March, including the failure to enact President Bush’s proposed federal tax credit to encourage first-time home buyers, “should put some caution into the notion that this is a strong recovery,” said Barbara K. Allen, a housing analyst at Oppenheimer & Co. in New York.
“The economic rebound will be fragile . . . and consumers will continue to be very cautious,” he said.
Despite the concern over the strength of the nation’s economy, sales of new homes during the first three months of this year remained 24% above those of the same period a year ago, when home sales came to a near standstill during the hostilities in the Persian Gulf.
And so for now, many builders and some analysts are taking the view that the March decline is an aberration in a nation on the way to economic recovery.
“This is really a non-problem. . . . I wouldn’t expect that the decline would continue,” said Rocky Tarantello, associate professor of real estate at USC. “If I see this kind of decline again next month, it will be of greater concern.”
“In general, the larger, well-financed builders like ourselves are actually doing fairly well,” said Richard A. Lewis, president of Upland-based Lewis Homes, one of the nation’s largest home builders. “Our sales have been pretty good for the last few months, and we are planning to start several new projects. The decline (reported by the government) is pretty surprising to us.”
The National Assn. of Realtors reported Monday that existing home sales stalled in March at a seasonally adjusted annual rate of 3.49 million. That was the highest level of resales since they hit a 3.50 million rate in February, 1989.
But analysts consider Tuesday’s new-home sale figure a more current barometer of housing activity than resales. New-home sales are compiled from recently signed contracts, whereas the National Assn. of Realtors bases its resale figures, in part, on March real estate closings that can in some cases stem from deals struck as long ago as January.
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