Sales of newly built homes fell 16.9% in February. The rate hasn’t been that bad since 1962 and some say Mother Nature is partly to blame. Learn more about this by reading the full article from The Street.
Rough winter weather is being blamed in the latest round of discouraging housing data, which showed that sales of newly built homes plunged 16.9% in February to the worst rate on record since 1962.
February’s new-home sales figure remained 28% below year-earlier levels. Every U.S. region, save for the West, saw record lows last month. The Northeast saw sales drop 57% month over month.
"The report was very weak, but putting the numbers in context is important," Jeffrey Kleintop, chief market strategist at LPL Financial, told TheStreet in an email.
He pointed out that weather across the country was "pretty bad" in February, and home-sale completions were delayed as a result. The Northeast’s huge 57% drop was likely due to particularly poor weather in the region last month, as opposed to the South, which saw only a 6.3% decline.
"The pullback in housing activity comes at a time when potential homeowners credit is the best it has been in nearly two decades," Kleintop said. "According to the recently released Financial Obligation Ratios from the Federal Reserve (which measure debt payments as a percent of income), at 23.9% the ratio for renters is the lowest it has been since the second quarter of 1993! Potential homeowners have the ability to buy, but are restrained by their own lack of confidence and limited credit availability. "
As the inventory of existing and distressed homes mounts, pressuring home prices, homebuilders have been struggling to compete.
"Builders really don’t have a whole lot of incentive to build," Anika Khan, a Wells Fargo Securities economist told Bloomberg ahead of the new-home sales report. Construction "activity remains depressed largely because of the downward pressure on home prices."
Data released Monday showed that existing-home sales dropped 9.6% in February to a far worse-than-expected seasonally adjusted annual rate of 4.88 million units, according to the National Association of Realtors.
"Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers," said Lawrence Yun, NAR’s chief economist.
"This tug and pull is causing a gradual but uneven recovery," he added. "Existing-home sales remain 26.4% above the cyclical low last July."
The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.
The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction (ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.
This article republished with permission from The Street.