Mixed Housing Data Point to Uneven Recovery
A slew of new numbers from the housing market confirm that a warm spring did in fact pull sales forward, but the new activity was not enough to bring home prices out of their decline significantly.
Sales of newly built homes plunged over seven percent in March, but only because February’s sales numbers were revised way up.
The actual number of sales in March beat expectations, coming in at a seasonally adjusted annual rate of 328,000.
Builders claim they do not compete against foreclosures. Just yesterday, executives at D.R. Horton argued that buyers today want a new home that requires no renovation and has not been damaged by previous owners.
As rent-seeking investors flood the market for distressed properties, purchasing largely in cash, regular buyers often can’t compete.
Still, new home sales were way down in the West and Midwest, where most of the nation’s distressed homes exist.
Whatever the competition, it doesn’t negate the effect that these distressed properties continue to have on home prices. Both the ten and twenty-city composites of the S&P/Case-Shiller home price indices hit new lows in February. Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa all hit new post-crisis lows.
Atlanta in particular is shedding its value, with home prices there down a whopping 17 percent from a year ago, thanks to spiking foreclosures.
On the flip side, home prices in Denver, Detroit, Miami, Minneapolis and Phoenix were up in February, with Phoenix rising 3.3 percent, largely because prices there are still down over 50 percent from the peak. Investors have eaten up much of the supply there, shifting the overall median price higher.
Prices for newly built homes, however, appear to be recovering, up over 6 percent in March annually. This as builders say they are offering fewer free upgrades and amenities now.
It’s hard to explain why prices are rising so much in this sector, perhaps because the big public builders have gained so much market share, they no longer have to compete against smaller boutique builders. It may also be that the only survivors outside the big guys are the custom, high-end builders.
Sales of newly built homes may have surged in February, but they came back down in March, which is usually the more popular buying month. The new home sales numbers are based on signed contracts and not closings. Home builder sentiment fell dramatically in April, which may be a sign that the downward sales trend will continue.