New-home sales fall 1.6% in February; KB Home’s orders drop
The housing market remains wobbly as new-home sales slipped 1.6% in February, their second decline in a row.
Sales of new single-family homes dropped to their slowest pace since October, reaching an annual rate of 313,000 from January’s 318,000, the Commerce Department said Friday. The decline follows a 5.4% tumble in January.
Across the country, sales were mixed, falling in the South and Midwest but rising in the Northeast and in the West. The data capped a week of promising economic indicators that had included strong auto sales, tumbling jobless claims and surging tourism spending.
KB Home, one of the country’s largest home builders, also released disappointing numbers Friday. Orders in the first quarter fell 8% to 1,197 homes after cancellations surged to 36% from 29% last year, the Los Angeles company said.
On the West Coast, KB’s orders fell 28% while prices rose 6%; in the Southwest, prices were up 26% as orders fell 30%.
The higher prices helped push KB’s overall revenue up 29% year over year to $254.6 million. The company posted a loss of $45.8 million, or 59 cents a share, narrowing its loss of $114.5 million, or $1.49, in the same quarter last year but still losing more than most analysts had expected.
KB Home shares fell 95 cents, or 8.5%, to $10.29.
But the dour data don’t mean that a housing market turnaround is a lost cause.
The month-to-month decline in new-home sales “is somewhat surprising, given that other housing market indicators are looking up,” a report from PNC’s economics division said.
“The fundamentals for home building are improving, with better job growth, low prices and mortgage rates, mortgage credit a little looser, higher stock prices, and pent-up demand for new homes as a result of the steep drops in construction and sales during the Great Recession,” researchers wrote.
The industry seems to be reaching a sort of equilibrium, with new-home sales up 11.4% compared with last February. Prices are at an eight-month high, with the median price of a new property up 6.2% year over year to $233,700 in February.
Many buyers, however, have focused instead on discounted properties, cheap foreclosures and previously owned homes, which had the best January-February selling season in five years.
That has somewhat hampered demand for new homes. At the end of February, 150,000 new homes were on the market, an inventory that will take 5.8 months to sell. Although the same number of new homes were waiting to be sold at the end of January, economists said those would require only 5.7 months to sell.
But even though home building was down overall last month, groundbreaking for new projects reached a nearly 31/2-year high. And the industry doesn’t seem to be too worried: A recent index from the National Assn. of Home Builders has housing market confidence measuring at a nearly five-month high.
