Housing Numbers Stay Strong

Don Hogsett, May 2, 2005

After a hot run over the past several years, propelled by historically low interest rates, the broad U.S. housing market remained strong during March with housing starts tumbling, existing home sales running largely in place, and only new home sales still pushing ahead.

Existing home sales, by far the single largest sector of the housing market, edged up 1 percent during the month, to a seasonally adjusted level of 6.9 million units, and have been stuck in a relatively narrow range over the past 13 months, moving up slightly one month, then giving up the gain shortly afterwards.

While interest rates remain low, sharply rising house prices may be having a chilling impact. Al Mansell, president of the national Association of Realtors, noted, that March "is the third consecutive month in which home prices have experienced double-digit annual gains."

All of March's gain in resales came out of the single-family home segment, which advanced 1.2 percent, while sales of condominiums and coops clipped 0.1 percent. Condo sales accounted for 12.3 percent of existing home sales during the month.

Coming off an all-time high in February, home builders put their foot on the brakes during March, and housing starts tumbled 17.6 percent, the Commerce Department reported.

The drop "was, to some degree, weather-related," said David Seiders, chief economist of the National Association of Home Builders.

"A sizeable decline in the South, the nation's largest housing market, followed a surge that was related to rebuilding in the wake of last fall's hurricane, and late-winter storms apparently held back starts in other areas as well."

The big winner in March was new home sales, which raced ahead 12.2 percent, building on a strong 8.2 percent increase the month before. New home sales were strongest in the Midwest and South, up 21.9 percent and 13.8 percent respectively. But sales in the Northeast remained weak, falling off 8.9 percent.

"The strength of this market continues to surprise most experts, and March's big acceleration, in new home sales was both unexpected and unaccounted for by our own builder surveys and other market signals," said Seiders. "Given the pace of sales to date and the slim inventories of unsold homes, clearly the production side of this business remains exceptionally healthy. We are, however, keeping a close eye on investor activity in some extremely hot markets."

Polishing up his crystal ball, Seiders commented, "Looking to the future, it will be difficult to sustain as quick a sales pace as we've seen in March.

However, given the fact that long-term mortgage rates have actually fallen since then and inventories are in such good shape, it's likely that new home sales for all of 2005 will challenge last year's record 1.2 million units."

Housing By Region
Month-To-Month % Change

Source: U.S. Department of Commerce and National Association of Realtors
Northeast 0.0% -3.6% -8.9%
Midwest 2.0 -29.3 21.9
South 0.4 -18.0 13.8
West 1.9 -12.7 9.9

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