May 29 2007
Sales of new single-family homes increased a surprising 16.2 percent in April to a seasonally adjusted annual rate of 981,000 units, according to figures released by the U.S. Commerce Department today. The April sales pace was 10.6 percent below a year earlier.
The increase followed downward revision to the sales rate for the previous month, and the sales pace remained below the 1 million-unit pace for the fourth consecutive month.
"Builders are pulling out all stops to work down heavy inventories in the face of weak demand that's been exacerbated by the subprime-related tightening of mortgage credit conditions," said Brian Catalde, president of the National Association of Home Builders (NAHB) and a home builder from El Segundo, Calif. "Our surveys show that the majority of builders are cutting prices and offering substantial non-price sales incentives, and their efforts are bearing fruit."
"We are also seeing buyers gravitate toward lower-priced homes to counter their affordability problems," Catalde said.
"We're viewing the large jump in new-home sales for April with a lot of caution, in view of the large month-to-month volatility historically displayed by these statistics," said NAHB Chief Economist David Seiders. "In addition, the April bulge may very well have reflected favorable weather swings, particularly in the South region. It also appears that the aggressive sales techniques being employed by builders are now showing some success, despite the subprime-related difficulties in the mortgage market."
"The first quarter may well have marked the low point for sales volume in the dramatic housing correction that began in the latter part of 2005. We are currently looking for a gradual recovery process going forward, at least on a quarterly basis," Seiders said.
The inventory of new homes for sale edged down in April to 538,000 units, equivalent to a 6.5 months' supply at the April sales pace and down from 8.1 months in March. Completed homes for sale were 33 percent of the inventory, while units still under construction represented 51 percent of the inventory and units for-sale that were permitted but not yet started represented almost 16 percent of the inventory level. The median length of time that completed homes were on the market was 6.0 months in April.
Regionally, new-home sales were up 27.8 percent in the South, 3.8 percent in the Northeast and 8.5 percent in the West for the month. Sales were down by 4.0 percent in the Midwest.