New residential home sales fall 7.1% in March; Update: USA Today predicts “subpar” economic growth this year

posted at 11:21 am on April 24, 2012 by Ed Morrissey

The string of bad economic news to close out Q1 continued today with the Census/HUD announcement of new residential sales in March.  The seasonally-adjusted annual rate of sales fell 7.1% from February, although there are a few glimmers of good news in the decline:

Sales of new single-family houses in March 2012 were at a seasonally adjusted annual rate of 328,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.1 percent (±20.7%)* below the revised February rate of 353,000, but is 7.5 percent (±19.6%)* above the March 2011 estimate of 305,000.

The median sales price of new houses sold in March 2012 was $234,500; the average sales price was $291,200. The seasonally adjusted estimate of new houses for sale at the end of March was 144,000. This represents a supply of 5.3 months at the current sales rate.

The inventory number gives a little more reason for optimism.  After more than three years of declines in new-home construction, the light at the end of the tunnel is at least in sight.  An inventory of five to six months is reasonable and manageable, and will encourage more production — assuming demand rises.  Unfortunately, as more foreclosures get dumped into the market this year, demand for new homes will probably remain near the bottom as buyers look for deals.

Reuters takes the glass-half-full approach, in part because previous estimates for December, January, and February got revised upwards:

New U.S. single-family home sales dropped in March to their lowest level in four months, but the reading still beat analysts’ expectations as the government said sales in prior months were higher than initially thought.

The Commerce Department said on Tuesday sales slipped 7.1 percent to a seasonally adjusted 328,000-unit annual rate.

Home sales in February were revised higher to 353,000 units, the fastest pace since November 2009, up from the previously reported 313,000 units.

Unfortunately, this comes in tandem with a poor report on resales in March, which fell 2.6% from February as well.  At least one-fifth of those sales were to investors, not families looking to own, which means that actual demand for ownership looks very soft indeed.  Recent jobs reports give no indication that demand will strengthen, either.  While the markets appear to be approaching a bottom — prices rose in resales in March, for instance — there is little indication that any rebound is in sight.

Update: Meanwhile, don’t expect anything better from the rest of the economy this year, USA Today warns:

Rather than a breakout surge in economic growth, mainstream forecasters say, Americans should expect the U.S. economy to slog forward for another couple of years.

The economy grew at a subpar annual rate of 1.7 percent last year, down from 3 percent the year before. The consensus forecast for this year now is for growth of 2 to 2.5 percent.

The U.S. economy is expected to slow later this year, dragged down by slowing global growth, rising anxiety about the elections and the specter of gridlock in Washington over urgent tax, spending and debt deadlines. The Bush-era tax cuts of 2001 and 2003 and the payroll tax cut of the past two years expire at year’s end, when last year’s debt deal also will force across-the-board cuts in federal spending unless Congress and the president strike new deals, but there’s no consensus on that.

A spate of recent indicators punctuated fears that the economy is stalling. March delivered only 120,000 new jobs, and the latest manufacturing and real estate data softened. Some economists say the economy’s strong six-month run through March might not be sustainable.

It actually wasn’t all that strong, either.  The annualized GDP growth rate for 2011Q4 only came to 3.0%, which isn’t weak but isn’t exactly strong.  From what we’re seeing in March, 2012Q1 is likely to finish well under that mark — but we’ll get our first look at that on Friday.


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Comment pages: 1 2

One day, Lad, all this will be yours!

UltimateBob on April 24, 2012 at 12:39 PM

If the socialist Dems get their way, it’ll be “one day lad, none of this will be yours.”

dentarthurdent on April 24, 2012 at 12:56 PM

If I were a Democrat, I’d be concerned.

angryed on April 24, 2012 at 12:33 PM

Fair Enough. Your ” two sides of a coin” comment from last week convinced me. Others here have tagged you as a liberal troll.
Good to get away from that.

Jabberwock on April 24, 2012 at 12:58 PM

Update: USA Today Common sense predicts “subpar” economic growth this year for years to come

fixed

joey24007 on April 24, 2012 at 1:02 PM

Rather than a breakout surge in economic growth, mainstream forecasters say, Americans should expect the U.S. economy to slog forward for another couple of years.

Unexpectedly

Bitter Clinger on April 24, 2012 at 1:04 PM

Rather than a breakout surge in economic growth, mainstream forecasters say, Americans should expect the U.S. economy to slog forward for another couple of years.
Unexpectedly

Bitter Clinger on April 24, 2012 at 1:04 PM

Axelrod to tweet some nonsense shortly.

Jabberwock on April 24, 2012 at 1:09 PM

Busness owners are doing this on purpose to hurt Barky. Just like the police photo-shopped that picture of Zimmerman’s head!!

SouthernGent on April 24, 2012 at 1:10 PM

I just bought a house in the Los Angeles area.

The market is crazy here. You wouldn’t think this economic news would be the case if you were looking in LA. It’s a seller’s market right now (at least for the lower-tier homes). We’d see a house come on the MLS and by the end of the day it would have 8+ offers on it, some above asking price.

This definitely seems to be localized to the 250-350k houses, as 400k+ still seem to sit for awhile but I’ve read similar testimonials from people looking in the Bay Area.

hisfrogness on April 24, 2012 at 1:30 PM

Obama heading for a landslide election victory in November,or so the polls are telling us :(

Sandybourne on April 24, 2012 at 1:43 PM

The Professor.

rogerb on April 24, 2012 at 1:54 PM

Sandybourne on April 24, 2012 at 1:43 PM

Get used to it. Carter was leading by a landslide right up until about 10pm EST on Tuesday Nov. 4, 1980.

http://polipundit.com/?p=36246

DanMan on April 24, 2012 at 2:06 PM

Meanwhile, don’t expect anything better from the rest of the economy this year, USA Today warns:

I’m seeing almost the same news on many financial websites today. Did a memo go out? Just asking.

dogsoldier on April 24, 2012 at 2:20 PM

Out of the murky haze rode a Fifth Horseman. His name was ‘Barry’.

MaiDee on April 24, 2012 at 2:30 PM

Get used to it. Carter was leading by a landslide right up until about 10pm EST on Tuesday Nov. 4, 1980.

http://polipundit.com/?p=36246

DanMan on April 24, 2012 at 2:06 PM

And note that we are being deluged with meaningless polls, including registered voters and, worse, all adults.

The largest polling houses aren’t even spending the money for polls of likely voters. This constitutes a +3 point benefit to Bam-Bam in every poll.

matthew8787 on April 24, 2012 at 2:32 PM

There seems to be an air of optimism by Ed in the analysis of this news based upon “light at the end of the tunnel” comment. I tend to disagree. I’ve been in the residential housing industry since ’92 and I think the element Ed is omitting is the simple fact that we’re not returning to what was normal in ’05-’06; the new normal will be considerably different.

One, we’re looking at a significant decrease in the number of builders available to construct new homes. We’re also looking at a different regulatory environment, both financially and environmentally. In ’05, if you had a 20 lot subdivision, a lot of builders could afford to build them out as specs, or at least get the ball rolling with activity by building specs. I imagine it’ll be a lot harder securing a loan to build a spec home in 2012. Builders will be really reluctant to carry the interest payments on a spec when there is such a low demand for new housing.

Two, I would imagine that after three years of Lisa Jackson at the helm, residential development costs have probably tripled. I realize the EPA doesn’t govern all matters at the local level, but they’ve got a lot of influence in the form of “conform, or figure out how to do X without those federal dollars you’re used to.” I know in Maryland, developmental costs have skyrocketed – I can’t imagine we’re the only state to buy into the nitrogen effect.

And three, even as demand increases, the financial opportunity for a serviceable loan may not. New bank regulations and requirements may make jumbo loans so cumbersome that a lot of builders will fold trying to revamp their operations for lower-scale housing units. I’ve seen it happen when times are good; when capital is scarce, major shifts in product lines are even more risky.

So basically, I think the new normal will look like a depressed market for some time to come. The bubble redefined normal, the Obama administration will alter it equally as far in the other direction.

BKeyser on April 24, 2012 at 2:33 PM

After more than three years of declines in new-home construction, the light at the end of the tunnel is at least in sight.

Sorry dude, that isn’t the light at the end of the tunnel, it’s on oncoming runaway freight train.

SWalker on April 24, 2012 at 2:39 PM

wearyman on April 24, 2012 at 11:33 AM

Strange that you would say that Wearyman. I have a recently updated 4 bedroom 3 bathroom home for sale on Grand Island (Erie County)where property taxes are low compared to the surrounding area and the schools are considered quite good. I really have not seen a sellers market in the 4 BR class altough properties with extensive land have been getting cash offers from people who want the land and probably don’t care about the houses.

KW64 on April 24, 2012 at 2:57 PM

There seems to be an air of optimism by Ed in the analysis of this news based upon “light at the end of the tunnel” comment. I tend to disagree. I’ve been in the residential housing industry since ’92 and I think the element Ed is omitting is the simple fact that we’re not returning to what was normal in ’05-’06; the new normal will be considerably different.

BKeyser on April 24, 2012 at 2:33 PM

That might be the case on the east coast, the rust belt and other economically depressed areas of the country.

Here in the Intermountain West, the housing market is strong, with new construction being up signifincantly over last year. I see new several subdivision developments and spec homes are under contract long before construction is completed.

Norwegian on April 24, 2012 at 2:58 PM

That might be the case on the east coast, the rust belt and other economically depressed areas of the country.

Here in the Intermountain West, the housing market is strong, with new construction being up signifincantly over last year. I see new several subdivision developments and spec homes are under contract long before construction is completed.

Norwegian on April 24, 2012 at 2:58 PM

Just announced that Atlanta home prices down over the year by 17%, and that “most major cities are down”.

slickwillie2001 on April 24, 2012 at 3:05 PM

Just announced that Atlanta home prices down over the year by 17%, and that “most major cities are down”.

slickwillie2001 on April 24, 2012 at 3:05 PM

That was bound to happen, since for the longest time during the housing bubble, the prices were inflated beyond what the houses were actually worth.

cmsciulli on April 24, 2012 at 3:47 PM

The economy grew at a subpar annual rate of 1.7 percent last year

So what? What was the growth rate after Reagan had only been in office three years?/

mankai on April 24, 2012 at 3:50 PM

Those that can, do.

Those that can’t, teach.

Those that can do neither, community organize.

jukin3 on April 24, 2012 at 7:47 PM

MSM…We’re turning the corner!

KOOLAID2 on April 24, 2012 at 8:56 PM

Obamanomics…it’s just more drain circling, until at last…nothing.

insidiator on April 25, 2012 at 7:32 AM

The economy grew at a subpar annual rate of 1.7 percent last year, down from 3 percent the year before. The consensus forecast for this year now is for growth of 2 to 2.5 percent.

God help us all if this guy is re-elected!

maables on April 25, 2012 at 11:03 AM

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