Following up on yesterday's slightly better report on sales of existing homes, the Commerce Department earlier this morning posted data showing that a more volatile market, sales of new houses, rose even more impressively last month.
Specifically, such sales rose 6.4% in April, to a seasonally adjusted annual rate of 433,000 homes. In March, such sales had totaled an upwardly revised 407,000 units. Initially, the March tally had been estimated at 384,000 houses. Expectations for this April had been 418,000 residences. Thus, this was a modestly better-than-expected showing, and further supports the argument that housing is now on the mend following a notable interest-rate and then weather-induced slowdown late last year and during the prior month, respectively.
This month-to-month improvement aside, the April, 2014 sales pace was still below the comparable rate tallied in April of last year, when sales had come in at 452,000 units. Housing sales have been restrained during the past year by the aforementioned rise in mortgage interest rates, the absence of sufficient inventory (which is still a modest concern), and at times this year by inclement weather, especially during this long and arduous winter.
Now, however, a spring thaw has developed in this market, and we are seeing some movement in homes. A recent multi-week reduction in mortgage rates, down most recently to 4.14%, is clearly starting to help. But inventory trends remain mixed, rising in the existing homes category, but falling for new homes, with the latest month showing an unsold supply of 5.3 months; in March, the supply of unsold homes had been at 5.6 months. A six-month supply is considered normal and healthy.
As to the performance of the respective locales, sales fell in the Northeast last month. This is the smallest of the four main regions of the country from a sales perspective. Volume, though, surged in the Midwest, gaining almost 50% in April. This is the second smallest region of the country. Meanwhile, sales were up 3.1% in the South, the largest area, and were essentially flat in the West, gaining ever so slightly.
On the whole, this was a reassuring report, although the continuing lack of adequate housing supply is of some concern. Overall, our sense is that the latest slump is probably over, especially if the recent decline in mortgage rates and the consequent improvement in the key affordability area can be sustained.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.