Housing Bubble
New home sales decline 'no cause for alarm' says NAHB
February 28, 2003
New-home sales fell below the million-unit mark for the first time in six months this January, slowing 15 percent from December’s record-high pace to a seasonally adjusted annual rate of 914,000 units, the Commerce Department reported yesterday. This was the slowest pace of new-home sales since January 2002.
"From a builder’s perspective, today’s report is really no cause for alarm," said Kent Conine, president of the National Association of Home Builders (NAHB) and a home and apartment builder from Dallas. "Some slowdown from the remarkably quick pace of sales we saw in the last six months was practically inevitable - particularly in light of the deterioration in consumer confidence measures. But there is still a lot of strength in the nation’s housing market."
While today’s drop was bigger than expected, it’s important to keep things in perspective, said Conine. "If we maintained the same sales pace we had in January throughout 2003, we’d still be looking at the second-best year on record for new-home sales."
Regionally, January’s decline was concentrated in the Midwest and South. In the Midwest, which posted its fastest-ever sales pace in December, a 42.2 percent decline in January brought sales back to earth for a seasonally adjusted annual rate of 163,000 units. The South posted a nearly 13 percent decline in January to a 406,000-unit rate, while the West reported a modest 1.4 percent decline to 279,000 units. The Northeast, which posted a significant decline in December, bounced back with a 43.5 percent gain to a 66,000-unit rate in January.
The inventory of unsold new homes rose by just over 2 percent in January to 346,000 units, a 4.5 months’ supply at the current sales rate compared to December’s 3.8 months’ supply. This does not mean, however, that the new-homes market is in danger of being overbuilt, explained NAHB Chief Economist David Seiders. "It looks like the entire ‘inventory’ gain in this report represents homes that have been permitted but not yet started," he said.
"Fundamentals in the market for new single-family homes remain quite solid - including long-term mortgage rates that are now hovering in the 5.8 percent range," Seiders added. "On top of this, our latest surveys reveal a high level of builder confidence heading into the new year. So, while February home sales could well be affected by unusually bad winter weather, ultimately 2003 should still shape up as the second best year on record for new home sales, and not a bad time to be a single-family home builder."
Source: National Association of Home Builders
