US New Home Sales Stronger than Expected in MarchLocation: Toronto New home sales in the US jumped 11.1% to 300,000 annualized units in March, beating market expectations for an increase to 280,000 units. While this represents a solid monthly gain, it follows the slowest pace of sales since recordkeeping began in 1963 at 270,000 annualized units in February (initially reported as 250,000 units) and represents the seventh-slowest pace of sales on record. The improved pace of sales, combined with a decline in the number of homes available for sale, pushed the months’ supply of unsold new homes down to 7.3 from 8.2 in February. The strength in new home sales was seen in smaller regions, with the Northeast (66.7%), West (25.9%), and Midwest (12.9%) all posting large gains in March. The South region, where sales outnumbered those of the other regions combined, provided some offset by edging marginally lower (-0.6%). The absolute number of new homes for sale declined 1.1% to 183,000 in March, marking the fourteenth consecutive month in which inventories either held steady or decreased. The 183,000 level is the lowest number of new homes available for sale since August 1967. The drop in months’ supply moves it closer to the series’ long-term average of 6.1, and further below the recent peak of 12.1 seen in January 2009. While new home sales are generally considered a more timely indicator of housing market conditions than existing sales (given that the former are counted earlier in the sales process than the latter), the persistence of market imbalances stemming from the flood of foreclosed properties onto the resale market that allow steep discounts to be had by homebuyers have reduced the market share of new homes (to 6% of total sales from a long-term average of 17%). With that said, today’s reported double-digit increase in sales and the continued decline in inventories are positive news and provide more evidence that the housing market is beginning to take some tentative steps toward recovery. Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities. |