Ahead of the Bell: US new-home sales

Sales of new US homes likely fell in March

Associated Press
US new-home sales collapse in March
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FILE - In this Jan. 8, 2015 file photo, a flag advertising a newly built home for sale flaps in the breeze in Richmond, Va. The Commerce Department releases new home sales for March on Thursday, April 23, 2015. (AP Photo/Steve Helber, File)

WASHINGTON (AP) -- The Commerce Department reports on March sales of new homes Thursday at 10 a.m. Eastern.

SALES SLIDE: Economists expect a 5.7 percent drop in new-home sales to a seasonally adjusted annual rate of 510,000, according to a survey by data the firm FactSet. Americans are purchasing new homes at a faster pace than a year ago, but sales are at roughly 40 percent of the pre-recession peak of 1.28 million in 2005.

Building permits for homes fell 5.7 percent in March from February to an annual rate of 1.04 million, the Commerce Department reported last week. The construction slowdown likely reflected a decline in sales prospects.

BUILDER OPTIMISM: Still, homebuilders are hopeful now that the spring buying season has begun. Winter storms in January and February closed construction sites and likely pushed back potential sales to later in the year. At the same time, a year-long hiring spree coupled with low mortgage rates has created more potential buyers.

The National Association of Home Builders/Wells Fargo builder sentiment index increased four points to 56 in April. Readings above 50 indicate more builders view sales conditions as good, rather than poor.

The outlook for sales of single-family houses over the next six months climbed to its highest level since December, while measures of current sales conditions and traffic by prospective buyers also improved.

Separately, sales of existing homes surged in March. The increased demand has yet to cause additional listings to come onto the market, creating the possibility that construction firms will increase the pace of building and more buyers will choose to purchase a new home instead.

Sales of existing homes rose 6.1 percent last month to a seasonally adjusted annual rate of 5.19 million, the National Association of Realtors said Wednesday. But that increase has caused tight inventories and higher prices that may help make new construction — which is usually pricier — more attractive.

The existing-home market had just 4.6 months of supply nationwide, well below the six months of supply that economists say would reflect a healthy market.

At the same time, job growth and low mortgage rates have put homebuyers in a stronger financial position.

Employers have added 3.1 million jobs over the past year, as the unemployment rate has tumbled from 6.6 percent to 5.5 percent. The hiring has increased the number of paychecks in the economy and created more potential for consumers to spend.

It has also become cheaper to borrow to buy a home. Average 30-year fixed rates were 3.67 percent last week, according to the mortgage giant Freddie Mac. That average has dropped sharply from a 52-week high of 4.33 percent.

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