New-Home Sales Down in February
Mar 28, 2006
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A 10.5 percent decline in sales of newly built single-family homes in February was reported by the U.S. Commerce Department. The reported decline primarily reflected a sharp shortfall in the West region.

"While today's numbers are weaker than expected, they're generally in line with what builders have been saying in our surveys," said National Association of Home Builders (NAHB) President David Pressly. "Demand seems to be tapering off as mortgage rates inch up and it becomes more challenging to afford to buy a home. We believe the market is transitioning to a cooler but still-healthy level."

"When looking at these numbers, you have to step back and focus more on trends than on month-to-month shifts to see meaningful patterns," added NAHB Chief Economist David Seiders. "This government report traditionally has lots of month-to-month volatility and is subject to substantial revision."

Sales of new single-family homes remained above the million-unit mark, at a seasonally adjusted annual rate of 1.08 million in February. Sales improved in both the Northeast and Midwest (by 12.7 percent and 5.2 percent, respectively), but fell 6.4 percent in the South--in addition to the nearly 30 percent decline in the West.

The inventory of unsold homes rose to 548,000 units in February, which is a 6.3-month supply at the current sales pace. This was the highest month's supply number since January of 1996.

"One factor in the inventory situation is the substantial housing starts activity that took place in the January – February period as builders took advantage of unseasonably warm weather to get a jump on production schedules," noted Seiders. "That months supply number will most likely come down as housing starts taper off and if the sales pace picks up--as we expect it to."

NAHB is currently projecting a decline of approximately 8 percent in new-home sales for 2006 as a whole, which would return the market to roughly the same level of activity posted in 2004.

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