Housing sales have mixed March

Don Hogsett, April 28, 2003

With warm weather returning and the war with Iraq seemingly won, Americans cheered up sufficiently to start buying homes again, and the broad housing market, while mixed in March, still launched a rally from weakness the prior month.

Housing starts and new home sales both made solid gains, recovering from deep declines in February. But the big market for existing home sales, the single-largest component of the housing market, continued to slide, falling by 5.6 percent in March, following a 4.3 percent drop in February. Sales of existing home sales were at their lowest level in nine months, since March 2002.

The fall-off, while steep, is not entirely unexpected after a strong run-up earlier during the year, said David Lereah, chief economist of the National Association of Realtors, the trade group that tracks sales of existing homes. "When we exceeded a six-million-unit pace for existing-home sales in January, it was clear that monthly sales rates would come off of that peak."

But even with the two straight monthly declines, Lereah said the re-sale market remains historically strong. "There's a huge momentum of sales activity continuing, and we're now at a much more sustainable level for home sales going forward." And, given persistently low mortgage rates, "We believe this will be the second-best year on record for housing."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record-low 5.75 percent in March, down from 5.84 percent in February.

As the direction of the war with Iraq became clear, and weather warmed up across much of the country, allowing contractors to get back to work, the pace of housing starts picked up strongly, rising by 8.3 percent.

New home sales, the most highly volatile segment of the housing market, advanced by 7.3 percent during March, reversing the prior month's 8.1 percent decline. Illustrating just how unstable that market can be, new home sales almost doubled in March in New England, rising by 82.5 percent, as they recovered from a 36.8 percent slide during February. And new home sales skidded down by 26.4 percent in the Midwest, weakening further after a 6.3 percent drop the month before.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Source: U.S. Department of Commerce and the National Association of Realtors.
Northeast -7.4% 9.8% 82.5%
Midwest -5.4 25.4 -26.4
South -4.3 9.4 15.9
West -7.0 -4.5 0.4

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