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CEP News - www.economicnews.ca
U.S. Preview: Further Deterioration Expected in New Home Sales
09:06 04/24 (CEP News) ‚Äď As the overhang of new homes sits at a
27-year high of 9.8 months, new home sales are expected to fall for a
fifth consecutive month in the March index from the U.S. Census Bureau
In February's report, sales fell 1.8% to a
seasonally adjusted annual rate of 590K, contributing to an almost 30%
decline since February 2007, when the pace was 840,000. Also, the
median price of new houses sold in February was $244,100, a sizeable
increase from the $225,600 figure from a month prior.
Of the 75 economists surveyed for the March release, the consensus is
looking for a 1.7% decrease to 585K, with the lowest predictions
expecting 560K sales and the most optimistic forecasting a rebound to
just over the 600K mark. A number below 559K would mark the lowest pace
of sales since February 1995.
Ellen Zentner, U.S. macro economist at the Bank of Tokyo-Mitsubishi,
expects the index will fall 0.7% to 586K, but she said traders have
already priced in a lot of negativity, so unless the results are really
unexpected, it won't cause much reaction.
Earlier this week, the NAHB/Wells Fargo survey of builder confidence
remained subdued at 20, where it has been for three months after rising
from the record low of 18 in December 2007. Zentner said that
consistency could point towards some stabilization from the supply
side, so a similar sign on the demand front would be welcomed by the
However, four factors are preventing the housing sector from improving,
she said. First, credit conditions remain tight. Second, until prices
stop deflating, potential homebuyers will sit on the sidelines. Third,
the economy continues losing jobs, and fourth, consumers are worried
about inflation eating up their disposable income, which prevents them
from buying big-ticket items.
Benjamin Reitzes, economist at BMO Capital Markets, said confidence is
down for both builders and consumers, and he predicts several months of
decline until the housing sector finally bottoms out near 500K in the
second quarter of this year. As for the March report, he looks for a
number below consensus at 575K, noting that even a worse figure would
still not garner much attention.
The first housing index to display a bottoming out will be the housing
starts report, he added, noting, "The quicker new home sales decline,
the quicker house starts will decline."
Zentner said the new home sales index "is a direct window to housing
starts." She said new homes only make up 14% of the housing sector, but
their link to housing starts acts as a tool to forecast construction
In the longer term, Zentner said the housing market will not make a turnaround until 2010, or at best, in late 2009.
Until that time, because housing is actually ‚Äútiny in terms of GDP,‚ÄĚ
the housing sector should neither drag nor boost economic growth, she
said, adding that the initial impact on the broader economy came only
from the big swing in the housing market.
In February's new homes report, regional data was quite mixed, as the
pace of sales in the Northeast fell from 62,000 to 37,000, while in the
Midwest sales dropped from 78,000 to 73,000. However, the South saw the
pace of sales go up from 315,000 to 333,000, and the pace in the West
moved up 1,000 to 147,000.
By Patrick McGee, [email protected], edited by Cristina Markham, [email protected]
(END) ¬©CEP Newswires - ¬©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca
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