Finance Globe

U.S. financial and economic topics from several finance writers.
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New Home Sales Drop Less Than Expected

Numbers released by the government on Friday on new-construction home sales indicate that the U.S. housing market may be nearing a turnaround.

Sales of new single family homes in March 2009 were a seasonally-adjusted annually rate of 356,000, according to a joint release by the U.S. Census Bureau and the Department of Housing and Urban Development. This is a slight drop of .6% from the revised numbers from February, but the slowing decline gives a hint that the housing market is stabilizing and recovery may be on the horizon.

The median sales price of new homes sold in March was $201,400; the average sales prices was $258,000. The seasonally adjusted estimate of new houses for sale at the end of March was 311,000, representing a 10.7 month supply of homes at the current sales rate.

The National Association of Realtors released data on Thursday indicating that existing home sales also eased in March. New home sales and existing home sales are released each month at about the same time. Many comparisons are made between the two series, but before doing any comparisons, be aware of some definition differences that affect the timing of the statistics.

The Census Bureau collects new home sales based upon the following definition: "A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit." The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction.

Concerning existing home sales, the NAR says that "the majority of transactions are reported when the sales contract is closed." Most transactions usually involve a mortgage which typically takes 30-60 days to close.

Another sign the economic decline may be slowing - the demand for durable goods was also better than expected for March. The Commerce Department reported a decline of .8% from last month, better than the 1.5% drop that analysts had expected after a 2.1% increase for the month of February.

“There’s a bottoming-out process going on here,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. “The numbers are still negative but not so negative as before. There’ll be a recovery in the second half, but it’ll be weaker than average.”


Sources:
U.S. Census Bureau
Department of Housing and Urban Development
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Monday, 14 October 2019

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