Amid recent data showing lackluster home resales and much fewer groundbreakings, the U.S. Commerce Department Tuesday delivered some positive news for the housing market: February’s new-home sales jumped to their highest level in seven years.
U.S. officials said new-home sales surged 7.8 percent from January’s level and were 24.8 percent higher than February 2014. The numbers blew away Wall Street expectations. Newly built homes sold at a seasonally adjusted annual rate of 539,000. Analysts predicted a rate closer to 470 million.
Builders hailed the report as the beginning of a healthy spring. But the data followed Monday’s report from Realtors indicating a shortage of existing properties and prices rising at such a fast clip that first-time home buyers are being shut out of the market.
Moreover, U.S. housing starts plunged to their lowest level in a year in February, mostly likely the result of a harsh winter that has kept builders idle. Groundbreaking tumbled 17 percent to a seasonally adjusted annual pace of 897,000 units.
But apparently the bad weather, particularly in the Northeast, did not dampen the interest of new-home buyers in February, the Commerce Department data shows. They are usually owners of existing properties looking to move into nicer, customized homes.
“Most sales activity continues to be among existing home owners who are trading up to new construction and taking advantage of low mortgage rates,” said NAHB Chief Economist David Crowe. “First-time home buyers remain absent from the market, restricted by tight lending conditions.”
The inventory of new homes for sale was at 210,000 in February, which is a 4.7-month supply at the current sales pace. That’s fairly close to the supply rate for existing homes. For the second straight month, unsold inventory of existing homes was at a 4.6-month supply at the sales pace in Feburary.
Regionally, new home sales increased a whopping 152.9 percent in the Northeast, while only 10.1 percent in the South. Sales dropped 6 percent in the West and 12.9 percent in the Midwest.
“Today’s numbers are a great start to the spring buying season,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “Hopefully, this is an indicator of how the rest of the year will fare.”