New-home sales in the US tumble in March

Washington

SALES of new US single-family homes dropped by the most in more than 6½ years in March and further declines are likely, as the novel coronavirus outbreak batters the economy and throws millions of Americans out of work.

The Commerce Department said on Thursday that new-home sales fell 15.4 per cent to a seasonally adjusted annual rate of 627,000 units last month. The percentage decline was the largest since July 2013.

February's sales pace was revised down to 741,000 units from the previously reported 765,000 units.

New-home sales, which account for about 10 per cent of housing market sales, are drawn from permits and tend to be volatile on a month-to-month basis because of a small sample.

Sales declined 9.5 per cent from a year ago in March.

The housing market was back on the recovery path, thanks to low mortgage rates, before the coronavirus lockdown measures. It had hit a soft patch starting in the first quarter of 2018 till the second quarter of 2019.

While extraordinary steps by the US Federal Reserve to cushion the economy's free fall - including aggressively cutting interest rates to near zero - will keep mortgage rates low, that is unlikely to boost the housing market because of historic unemployment and faltering consumer confidence.

A report on Tuesday showed that sales of previously-owned homes falling by the most in nearly 4½ years in March. Homebuilding collapsed in March at a speed not seen in 36 years.

Last month, new-home sales dropped 8.1 per cent in the Midwest and tumbled 38.5 per cent in the West. They plunged 41.5 per cent in the North-east and slipped 0.8 per cent in the South, which accounts for the bulk of transactions.

The median new-house price increased 3.5 per cent to US$321,400 in March from a year ago. Economists expect slower house price growth or even a decline in home values this year as the coronavirus undercuts demand.

New home sales last month were concentrated in the US$200,000 to US$749,000 price range. New homes priced below US$200,000, the most sought after, accounted for 10 per cent of sales.

There were 333,000 new homes on the market in March, up from 324,000 in February. At March's sales pace, it would take 6.4 months to clear the supply of houses on the market, up from 5.2 months in February. REUTERS