This morning the Department of Commerce released the numbers for new home sales in March. The consensus is: the economy is still struggling to pick up. With an annualized number of 328,000, March saw a decrease of over 7% in new home sales from those in February. This comes at a bad time for sales since spring and summer are the seasons that provide the largest increase in sales in the real estate market. The sales for homes in February were originally reported at 313,000, but were adjusted up to 353,000. Without the adjustment the March numbers would have shown an increase instead of a decline.
With mortgage rates remaining at near all-time lows there is no reason that the housing market should not be moving much more rapidly than it is. The only explanation is that consumers are still worried about the future of the economy, so they are hesitant to make the commitment to purchase a house. Another factor could include the fact that there have been unseasonably mild temperatures throughout the past winter, and many more people decided to purchase their homes earlier in the year.
In order to see the economy start to move back in the right direction, home sales need to post a steady incline, rather than the volatility seen over the past several months. This incline was seen at the end of 2011, however renewed worries, many of which were driven by an increase in fuel costs, have pushed the numbers back down. Many professionals agree that in order to have a strong and healthy economy, the new home sales numbers need to reach an annualized 700,000. Currently the U.S. is around half of that goal.
Investors and economists pay close attention to the home sales in order to determine the overall direction of the economy. When there are orders for new homes, construction activity increases, providing jobs. This spurs on many manufacturing companies to produce the supplies, and many retailers will see increased business from people furnishing their new homes. If home sales remain stagnant or drop, all of these industries will be hurt.
The U.S. Bureau of Census, Department of Commerce, and Department of Housing and Urban Development all work together in order to bring the new home sales report. This report is issued toward the end of every month, with the numbers from the previous month being revised at that time. The report can be misleading with the number of homes being sold, and the reader should keep in mind they are annualized numbers, not the numbers for one month. This report also only includes sales of new homes; it does not include sales of existing homes.