Sales of New Homes Up a Modest 3% in March : Real estate: Analysts attribute the continued weak performance to the higher cost of borrowing.
Sales of new homes rose modestly in March but could not recover from February’s 12.5% plunge, the Commerce Department said Tuesday. Analysts cited the high cost of borrowing.
Sales gained 3% in March to a seasonally adjusted annual rate of 577,000 units. But that followed a revised 12.5% plunge in February and left the March sales a steep 20% below the pace of a year ago.
Analysts said demand for new homes, like new cars, is suffering because of steeper credit costs. Mortgage rates have eased since the start of 1995 but remain 1 1/2 percentage points above the bottom they hit in late 1993.
“We have had some decline in mortgage rates, but it would take a much larger drop to offset the impact of a weaker overall economy,” said economist Michael Carliner of the National Assn. of Home Builders.
Construction starts on new homes declined for three straight months through March and will probably continue falling until home buying picks up.
Most analysts expect sales of new homes for all of 1995 to drop about 10% from 1994 to about 600,000, but they also had predicted somewhat stronger March sales.
“We’re not looking for a rebound. We’re expecting and hoping that things will remain about where they are,” Carliner said.
Previously, the department said sales of new homes had fallen even more sharply in February, by 14%, to a rate of 551,000. It revised that upward to a 560,000-unit rate--still the lowest since 554,000 in May, 1992.
“The data on home sales, combined with the latest automobile sales data, indicate that both these interest-rate-sensitive sectors of the economy are continuing to falter,” said economist Marilyn Schaja of Donaldson, Lufkin & Jenrette Securities Corp. in New York.
Major auto makers reported Monday that their sales dropped sharply in April--a fourth straight monthly decline--as warmer weather and more incentives failed to lure buyers.
The housing industry is burdened by big inventories.
Stocks of completed but unsold new homes swelled to a seasonally adjusted annual rate of 349,000 in March from 347,000 in February. That was the highest level of completed homes for sale since July, 1990, when inventories were at the 350,000-unit rate.
Nor was the regional pattern in March encouraging, as sales rose in the West and Midwest but fell in the Northeast and South.
Despite reports of bad weather in California in March, sales of new homes in the West soared 38.7% to an annual rate of 172,000, the biggest monthly increase since a 48% rise in December, 1981.
Sales in the Midwest were up 11.7% to a rate of 115,000.
But home sales dropped 14.1% in the Northeast to a rate of 55,000 a year, and they fell 13% in the South to 234,000 a year. It was the largest monthly fall in the South--the nation’s biggest regional housing market--since a 15% drop in May, 1994.
The average price of a new home fell to $158,500 in March from $159,000 in February. The median price fell to $130,000 from $133,900 in February. The median price is the point at which half the homes sell for more and half sell for less.
Mortgage rates eased by the end of April to 8.26%, down from more than 9% at the start of the year. But that was still well above the low of 6.74% reached in October, 1993.
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New Home Sales
Seasonally adjusted annual rate, in thousands of units:
March 1995: 577
* Source: Commerce Department
