WASHINGTON – More people bought new homes for a second straight month in April, a hopeful sign. Still, sales remain far below a pace that would signal a turnaround for the depressed housing market.
New-home sales rose 7.3 percent last month to a seasonally adjusted annual rate of 323,000, the Commerce Department said Tuesday. A healthy real estate market would produce about 700,000 new-home sales a year.
People have little incentive to buy new homes, in part because they're comparatively expensive. The median price of a new home rose more than 2 percent from March to $217,900. New-home prices are more than 30 percent higher the median price of re-sales — twice the normal markup.
The latest sales numbers come in the midst of a weak spring home-buying season. Analysts had been forecasting an uptick in sales for the past several months. It hasn't happened. April's new-home sales are 23 percent lower than in the same month last year.
Many would-be buyers of new homes are instead favoring older, discounted re-sale homes, said Paul Bell, a Realtor with the Prudential Americana Group in Las Vegas.
"That's where the deals are," Bell said.
Shares of homebuilder companies rallied briefly after the report on new-home sales suggested that builders might step up construction. But stocks quickly fell on concerns over Europe's lingering debt crisis.
The housing sector remains the weakest part of the U.S. economy, noted Ian Shepherdson, chief U.S. economist at High Frequency Economics. Sales of new homes have declined 18 percent in the nearly two years since the recession ended.
Last year, Americans bought the fewest number of new homes on records going back 47 years. High unemployment, tight credit and a lingering fear that prices will fall further have discouraged many would-be buyers.
A further obstacle is gas prices. Elizabeth Duke, a Federal Reserve governor, said Tuesday that the jump in gas prices since February has contributed to a slowdown in big purchases by consumers.
At the same time, Brad Hunter, chief economist with Metrostudy, noted that the number of foreclosures has slowed in some areas because of backlogged state courts. A result is that builders in desirable locales are "raising prices, indicating some recovery in those submarkets."
New-home purchases rose in every region last month, after severe winter weather had hammered many areas during winter. Sales jumped more than 15 percent in the West, 7.7 percent in the Northeast, nearly 5 percent in the Midwest and more than 4 percent in the South.
Purchases for the past three months were also revised to show slightly more homes had been sold.
The number of new homes on the market — about 174,000 — is at its lowest point since record-keeping began in 1963. At the current pace of sales, it would take 6.5 months to clear them off the market. That's the lowest supply in a year.
Still, analysts say the supply of new homes for sale is being kept artificially low. Home construction is far below a healthy level.
"Builders remain reluctant to increase inventories, as they face tough competition from foreclosures," said Mark Vitner, senior economist at Wells Fargo.
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