Counter to expectations, new homes sales in the United States fell 2.2% to a record low in February. There are two primary reasons for the decline. The first is weather, new home purchases were down sharply in the Northeast and Midwest, much of which were blanketed by snow in February (conversely, demand for new homes rose 21% in the West). The second reason is that new homes are in competition with steeply discounted foreclosed homes. Until the excess supply of distressed homes is absorbed, new home sales probably will struggle.
The median price of a new home did increase 5.2% on average nationwide, the largest increase in over two years. The price of existing homes decreased .6% last month.
There was some promising news this morning, durable goods orders were up .5% in February, in line with most predictions. This is the third consecutive monthly increase for durable goods orders. The backlog of durable goods orders increased by the largest amount in a year. This is a promising sign that the manufacturing sector is beginning to recover in earnest. Lindsey Piegza, an economist from FTN Financial was quoted in a Bloomberg story as saying “Businesses are ready to invest not just in inventories, but in equipment as well. These will be some of the key drivers of growth going forward”.
Interest rates remain low, and it appears the Federal Reserve intends to keep them low for the time being. On Monday San Francisco Fed President Janet Yellen said “I don’t believe this is yet the time to be tightening monetary policy”. As to inflation, she said “I don’t think we’re due for an outbreak of inflation, not in the short run, as a result of the Fed’s economic stimulus measures and not in the long run as a consequence of massive federal budget deficits”.
The housing market continues to favor buyers, with low current mortgage rates, low home prices, and the $8,000 first time home-buyer tax credit available for another month. If you are a prospective home-buyer, call one of our mortgage professionals today at 877-868-2503 for some of the lowest mortgage rates in the industry.
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