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Friday, March 23, 2012

New home sales fell in February, but prices rose 2012

 New home sales fell in February, but prices rose 2012
The pace of new-home sales fell last month even as prices jumped to their highest level since June, according to figures released Friday by the Commerce Department, capping a week of mixed housing data that showed a market with signs of recovery but still deeply in turmoil.

The agency said sales of new homes fell 1.6 percent in February from the previous month, to an annualized rate of 313,000, a figure lower than many economists had predicted. Still, the numbers represent an 11.4 percent increase from the previous February. The median sales price of new homes sold last month rose more than 8 percent to $233,700 — the highest mark in eight months. The average sales price was $267,000, the Commerce Department said.

Friday’s numbers served as yet another reminder that while bright spots have emerged in certain areas of the nation’s wounded housing market, a full recovery remains nowhere in sight.

On Monday, a report showed that confidence among U.S. homebuilders held steady at the highest level since 2007, and that sales expectations among builders had continued to climb. On Wednesday, new data from the National Association of Realtors showed that the sale of previously-owned homes dropped 0.9 percent in February to a seasonally-adjusted rate of 4.59 million. The figure marked an 8.8 percent increase in sales over the previous year.

The week’s sales figures disappointed some economists and housing industry representatives who had expected more brisk sales due to historically-low interest rates, an improving job market and one of the warmest winters on record. But other experts argue that the numbers point to a housing market on the mend, particularly data showing that the steep price drops of the recent past seem to have leveled off.

What remains certain is that plenty of uncertainty lies ahead.

The number of “underwater” mortgages — in which borrowers owe more than their homes are worth — stand at their highest level since 2009, according to a report released this month by CoreLogic. Currently, more than 11 million homeowners are underwater on their houses.

In addition, foreclosures that had been put on hold after reports of widespread paperwork problems have begun to move forward again in parts of the country. That new wave of foreclosures eventually should help the housing market hit bottom and begin to recover. But in the short term, such actions are likely to clog court systems, leave many borrowers in a state of limbo and flood local housing markets, at least temporarily driving down prices.

Foreclosures and short sales still account for more than one-third of all existing home sales, according to data from earlier this week.

The Obama administration and lawmakers on Capitol Hill have continued to press the independent regulator for Fannie Mae and Freddie Mac to allow the government-backed mortgage giants to undertake more “principal reductions” — lowering the loan balances of people underwater on their loans.

Government officials and five major banks also finalized a landmark $25 billion foreclosure settlement in March, which won’t heal the housing market’s woes but should aid a select group of struggling homeowners and force the banks to do additional principal reductions.
Sales of new homes in the United States fell in February for the second straight month, a reminder that the depressed housing market remains weak despite some improvement.

The Commerce Department said Friday that new-home sales dropped 1.6 percent last month to a seasonally adjusted annual rate of 313,000 homes. Sales have fallen nearly 7 percent since December.

While a mild winter and three months of strong job growth have lifted re-sales, those conditions haven't benefited the new-home market. The current pace is less than half the 700,000 that economists consider to be healthy.

Economists cautioned that the housing market is a long way from fully recovering.

"Despite renewed hopes over the turn of the year for an imminent turn in housing, it appears that it is too early for such optimism to translate into a rapid pick-up in real activity," said Yelena Shulyatyeva, an analyst at BNP Paribas.

There were some positive signs in the report. The government revised December's sales figures up to show an annual rate of 336,000, the best sales pace in a year.

And the median sales price for new homes surged in February more than 8 percent, to $233,700. That's the highest median price since June and could suggest builders are anticipating more sales in the months to come.

Just 150,000 new homes were for sale in January and February -- the lowest on records dating back to 1963. The supply of new homes on the market has consistently fallen over the past two years, which could help stabilize prices.

Jennifer Lee, senior economist at BMO Capital Markets, said the price increase was possibly "an indication of homebuilders' growing confidence in their sector."

Though new-home sales represent less than 10 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

Builders are growing more confident after seeing a growing number of people express interest in buying this year. They have responded by requesting the most permits to build single-family homes and apartments since October 2008.

Sales of previously occupied homes have risen more than 13 percent since July. And January and February made up the best winter for re-sales in five years, when the housing crisis began.

A key reason for the dismal sales in the new-home market is that builders must compete with foreclosures and short sales -- when lenders accept less for a house than what is owed on the mortgage.

Foreclosure activity surged in February across half of the states. The pace of foreclosures is increasing now that states have reached a settlement with the nation's five biggest mortgage lenders over foreclosure abuses.

Builders have also stopped working on many projects because it's been hard for them to get financing or to compete with cheaper resale homes. For many Americans, buying a home remains too big a risk more than four years after the housing bubble burst.

Sales were mixed across the country. They fell 2.4 percent in the Midwest and 7.2 percent in the South. They rose 8 percent in the West and 14.3 percent in the Northeast.
In addition, Bank of America this week announced a “mortgage to lease” pilot program in which a small number of borrowers facing foreclosure will be allowed to relinquish ownership in their homes without penalty and remain as tenants. The initial phase will include less than 1,000 people invited by the bank to participate in markets such as Arizona, Nevada and New York.

If the program proves successful, Bank of America officials said, it could be expanded to more homeowners in additional markets.


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