New Homes Sales Fall 3.9% In February, Far Below Estimates
Sales of new U.S. homes fell 3.9% in February to the lowest rate in nearly seven years while the number of new homes on the market grew, according to a government report on Monday that showed more signs of weakness in the housing sector.
The disappointing report on new home sales followed a more upbeat read on the U.S. economic activity. Data from the Federal Reserve Bank of Chicago showed a modest uptick in economic activity, which lifted it off its lowest level in 16 months. The improvement was driven by strength in production indicators.
Separately, the Federal Reserve Banks showed manufacturing activity in its district was mixed in March.
The monthly decline in new home sales was the second straight and the volume of sales fell to their lowest level since June 2000, when they hit 793,000. New single-family home sales fell to an annual rate of 848,000 units from a downwardly revised rate of 882,000 in January, the Commerce Department said.
On average, analysts were expecting February sales to rise 6.7% to an annual rate of 1,002,500 units from the previously reported rate of 937,000 units in January.
In February, the median sales price of a new home rose $6,800 to $250,000 from $243,200 in January.
At the current sales pace, the supply of new homes available rose to 8.1 months at the current sales pace, the highest rate since January 1991, from 7.3 months in January.
Recent New Home Sales Reports
|Month||Units (annual rate)||% Chg - Period to Period|
|2006 - Nov||987k||+ 3.68%|
|2006 - Dec||1019k||+ 3.24%|
|2007 - Jan||890k||- 12.66%|
|2007 - Feb||856k||- 3.82%|
|2007 - Mar||844k||- 1.40%|
|2007 - Apr||981k||+ 16.23%|
Michelle Meyer, an economist at Lehman Brothers, told Reuters that the high level of inventory is "concerning."
"We have to see inventory being worked off," Meyer said. "This is a weak report regardless of the seasonal adjustments. The imbalance in the housing market is going to last longer than expected. The effect from housing is going to slice 1.0 percentage point off GDP this year."
The weaker data counters some of the reassuring news on Friday when a real estate trade group reported a stronger-than-expected month of existing home sales.
The sales pace of previously owned homes rose 3.9% in February, the biggest gain since March 2004 the National Association of Realtors said on Friday. Home resales, which represent 85% of the housing market, climbed to a 6.69 million-unit annual rate.
2007 Feb - New Home Sales by Region
|- 26.79 %||- 20.00%||- 7.02%||+ 24.60%|
"The report is consistent with a persistent overhang in the housing market," said Alex Beuzelin, a foreign exchange analyst at Ruesch International. "This disappointing number highlights the ongoing risk of slower housing activity on the broader economy, and that's why we are seeing the dollar sell off."
Across the regions, the West saw the only increase in new-home sales with a 24.6% increase. In the Northeast, new home sales fell 26.8% while the decreased 20% in the Midwest and 7% in the South.
Chicago Fed Index Rose To 0.03
The Chicago Fed said its National Activity Index rose to 0.03 in February from an upwardly revised -0.72. It was previously reported as -0.74 in January.
The three-month moving average of the index was negative for a sixth straight month, but rose to -0.02 from an upwardly revised -0.23. It was originally reported as -0.29 in January.
The Chicago Fed said the jump in the three-month average toward zero suggests growth in national economic activity was near its historical trend and that inflation pressures over the next year are balanced.
Stronger production-related indicators reflected a 1% increase in total industrial production and rising capacity utilization on the month.
The three other broad categories of indicators (employment, consumption and housing/sales) were all negative.
Employment indicators were hurt by slower job creation in February, even as the national jobless rate fell.
Overall, 38 of the 85 individual indicators tracked by the Chicago Fed made positive contributions in February while 47 made negative contributions. Some 51 indicators improved in February from January while 34 indicators deteriorated.
Dallas Fed Production Index Rose To 27.2
Meanwhile, manufacturing in the Dallas Fed district, which represents a notable portion of total U.S. output and is concentrated in energy production and electronic goods, rose to 27.2 from 18.1 the month before. However, the Dallas Fed's measure of general activity fell to 12.7 from 26.0 a month earlier.
Readings above zero denote rising activity levels.
The prices paid index inched up to 29.7 from 29.3 in February, while the prices received hit 12.4 compared with 15.0 the prior month.
The new orders index, meanwhile, stood at 20.6 from 26.8 in February. The employment index was 19.0 from 19.7.