New-Home Sales Fall Short of Forecasts

U.S. builders sold fewer homes than expected in February, indicating the housing boom that helped sustain the economy through the recession is tapering off.

The 5.3% increase brought the annual sales rate to 875,000 new single-family homes from 831,000 in January, the Commerce Department said. That compares with a record 907,000 new homes sold in 2001.

“Home buying remains solid but it’s no longer steadily increasing,” said Steven Wood, chief economist at FinancialOxygen Inc. in Walnut Creek, Calif. “This will limit housing’s effect on boosting the economic recovery.”

The interest rate on 30-year mortgage loans rose to 7.14% this week, the highest since the first week of January, and that may dampen sales in coming months.

Still, KB Home and other builders are faced with a growing backlog of homes sold and not yet started. That’s likely to keep construction companies busy for much of the year.

Analysts had expected February sales to rise 8.1% from January’s pace. New homes account for 15% of all houses sold.

Housing and related services account for about 14% of gross domestic product, according to the National Assn. of Home Builders.

The backlog of houses sold and not yet under construction rose to 27,000 last month, the highest since June 2001, from 22,000 in January. Builders in February also were working on and completing about the same number of homes that they were 12 months ago, the government’s statistics showed.

L.A.-based KB Home, the third-largest U.S. builder by homes sold, had two quarters’ worth of orders awaiting construction.

Prices may head higher as builders are faced with higher costs for raw materials. The price of lumber reached a six-month high this month as the U.S. prepared to set duties averaging 29% on Canadian imports. Opponents of the tariffs say the tax will add about $1,500 to the cost of a new home.

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New-Home Sales

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