Starts down, rest of market sturdy

Don Hogsett, June 2, 2003

Staying the course despite a soft economy and a weak employment outlook, the broad U.S. housing market turned in a sturdy performance during April, with two of the three market segments — existing and new home sales — both making gains.

But hedging their bets and still acting antsy about the market's buying activity going forward, the nation's home builders pulled back during the month, and so housing starts tumbled by 6.8 percent beneath March revised numbers. But even with the drop, housing starts are still up by 2.7 percent from year-ago levels, the U.S. Commerce Department reported.

The strong sales, better than some economists had expected, helped stifle fears raised by a February decline that the housing market could be a bubble waiting to burst.

Existing home sales — by far the largest slice of the domestic housing pie, climbed by 5.6 percent, canceling out a 5.6 percent decline recorded the month before. And the rapid conclusion to the war in Iraq had a lot to do with it, said David Lereah, chief economist of the National Association of Realtors. "Consumer confidence rose following the swift action in Iraq, mortgage interest rates have been at record lows and new-home sales rose sharply in March," he said. "The favorable conditions in April caused existing-home sales to rise to their fifth-best showing ever — a pace that will be difficult to sustain but demonstrates that the housing sector will be close to a record this year."

Persistently low mortgage rates remain a major driver of the market. Freddie Mac reported the national average commitment rate for a 30-year fixed-rate mortgage was 5.81 percent in April, up slightly from 5.75 percent in March, but still well below the year-ago level of 6.99 percent.

After shooting up by a revised level of 8.1 percent in March, sales of new homes climbed again in April, edging up by 1.7 percent, the Commerce Department reported.

Given the strength in new home sales, the supply of new homes on the market fell to 3.9 months from 4.1 months in March, the lowest supply level since last September.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Northeast 4.8% -1.3% -17.8%
Midwest 4.1 -7.1 13.4
South 4.1 -10.9 0.6
West 9.6 -0.7 4.3

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