By Lucia Mutikani
WASHINGTON (Reuters) – Sales of new U.S. single-family homes fell in February after surging in the prior month, and could decline further because of the coronavirus pandemic which is boosting unemployment and severely disrupting economic activity.
The Commerce Department said on Tuesday new home sales dropped 4.4% to a seasonally adjusted annual rate of 765,000 units last month. January’s sales pace was revised sharply higher to 800,000 units, which was the highest level since May 2007, from the previously reported 764,000 units.
Economists polled by Reuters had forecast new home sales, which account for more than 10% of housing market sales, declining 2.0% to a pace of 750,000 units in February.
“We expect new home sales to fall more sharply in March and decline nearly 10% in the second quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York. “Low mortgage rates and pent-up demand will be supportive of housing when a recovery is underway, but severe job losses and damage to household confidence may make a quick bounceback difficult.”
New home sales are drawn from permits and tend to be volatile on a month-to-month basis because of a small sample. Sales jumped 14.3% from a year ago.
The coronavirus has brought much of the United States to a halt as state and local governments enforce “social distancing” policies aimed at containing the highly contagious virus, virtually closing all restaurants, bars, cinemas and theaters.
The government reported last week that the number of Americans filing claims for unemployment benefits jumped 70,000, the most since 2012 to a two-and-a-half year high of 281,000 during the week ended March 14. Economists are predicting claims will accelerate to a record 1.5 million or more when last week’s data is published on Thursday.
The Federal Reserve on Monday rolled out an extraordinary new array of programs aimed at blunting the “severe disruptions” to the economy caused by the coronavirus outbreak, backstopping an unprecedented range of credit for households, small businesses and employers. The U.S. Congress was on Tuesday close to reaching a deal on a $2 trillion stimulus for the economy.
Last month, new home sales fell 7.3% in the Midwest and tumbled 17.2% in the West. They soared 38.9% in the Northeast and rose 1.0% in the South, which accounts for the bulk of transactions.
The housing market has regained its footing as mortgage rates have declined after hitting a soft patch beginning in the first quarter of 2018 through the second quarter of 2019.
Reports last week showed existing home sales hit a 13-year high in February. Single-family homebuilding, which accounts for the largest share of the housing market, increased in February to the highest level since June 2007.
Completions of single-family housing last month were the highest since December 2007, and the inventory of homes under construction rose to levels last seen in December 2006.
That could help to ease a shortage of homes that has constrained sales. The median new house price increased 7.8% to $320,000 in February from a year ago.
Sales last month were concentrated in the $200,000-$749,000 price range. New homes priced below $200,000, the most sought after, accounted for 11% of sales.
There were 319,000 new homes on the market in February, down from 322,000 in January. At February’s sales pace it would take 5.0 months to clear the supply of houses on the market, up from 4.8 months in January.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chris Reese)