Sales of New Homes
Inched Higher in March

Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000, the Commerce Department reported Wednesday.

Sales of new homes were off 23.5% compared with March 2006.

The inventory of unsold homes rose by 1,000 to 545,000 in March, representing a 7.8-month supply. The inventory is down 1.4% compared with a year earlier, the biggest year-over-year decline ever recorded.

The median sales price rose 6.4% year-over-year to $254,000, as luxury homes continued to increase their market share.

The March sales pace was weaker than the 895,000 expected by economists surveyed by MarketWatch. Sales in the previous three months were revised lower as well. February's revised annualized sales pace of 836,000 was the lowest since September 1999.

In a separate report, the Commerce Department said orders for durable goods rose 3.4% in March, led by a surge in aircraft orders and robust growth in core capital equipment orders.

Details

The increase in sales in March came in two regions that saw much improved weather in March compared with February. Sales fell in the other two regions.

Sales jumped 50% in the Northeast after falling 21% in February. Sales rose 9.8% in the Midwest in March after falling 23% in February.

In the West, sales fell 0.9% in March. Sales dropped 2.7% in the South, the seventh consecutive decline in the biggest region for new home sales.

The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions, as in January, are common.

The standard error of 12.6% is so high, in fact, that the government cannot be sure in most months whether sales rose or fell.

It can take up to six months for a trend in sales to emerge. New-home sales have averaged 924,000 per month over the past six months, compared with 951,000 in the six months ending in February. The six-month sales average is now down 23% from last March's 1.20 million pace.

Weather conditions can play havoc with housing data in the winter months. Most observers say sales in the prime spring selling months of March, April and May will set the tone for this year's sales.

Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.

Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.

On Tuesday, the National Association of Realtors reported sales of existing homes plunged 8.4% in March, the biggest decline in 18 years.

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