Rebound of new home sales impressive, but level still close to record low
This post is a guest contribution by Asha Bangalore, vice president and economist at The Northern Trust Company.
Sales of new single-family homes rose 7.3% to an annual rate of 323,000 in April after an 8.3% increase in March. The record low sales mark of new single-family homes is 278,000 seen in August 2010 (see Chart 1). Essentially, sales of new homes continue to bounce around the record low reading after seven quarters of economic growth. Sales of new homes increased across all regions of the nation, with the West posting the largest gain (+15.0%) and the South the smallest increase (+4.4%), while the sales performance in the Midwest (+4.9%) and Northeast (+7.7%) was moderate.
The number of homes for sale in April at 175,000 hit a new all-time low (see Chart 2), which is encouraging for home building activity. But, the home builders survey continues to send pessimistic signals.
The inventory of unsold new homes fell to a 6.5-month supply in April, which is close to the historical mean of 6.3 months. The median price of new single-family homes rose to $127,900 in April from $214,500 in March and posted a 4.6% increase from a year ago.
The April report of new home sales shows an improvement in terms of higher median price, lower inventory of unsold homes, and an increase in sales. However, a near term sustained increase in home sales is unlikely until a sustained drop of the employment rate emerges.
Source: Asha Bangalore, Northern Trust – Daily Global Commentary, May 24, 2011.
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