February new home sales reached another new low after punching through that barrier in January. Sales were down 2.2% overall and down significantly in the Northeast (-20%) and the Midwest (-18%), but up significantly in the West (21%). The South region, the largest and therefore affecting the national numbers the most, was the only region to score a new all time low for the region at 146,000 sales (seasonally adjusted annual rate).
The drop has to be a combination of unusual weather as well as continued consumer reluctance because of poor employment markets. As employment trends turn positive in the next couple of months, consumers will become more confident and willing to make the long-term commitment that buying a home requires. Some additional contract signing will also occur in the next two months of data as the home buyer tax credit deadline of April 30 for a signed contract approaches.
Softness in new home sales in December and January were a result of moving intended purchases to November to qualify for the expected credit expiration. Softness in February has more to do with the economy and consumer worries than time-shifted purchases. So far, the expansion of the credit to repeat buyers has not had a significant effect, although some effect is apparent in the house price increase.
One piece of good news was an increase in median sales price to $220,500, up 5% from February 2009. Since prices are a reflection of the composition of homes sold, the increase is evidence that some of the sales were from the middle of the price spectrum rather than from the lower end last year when the first time home buyer credit drove sales of starter homes.
New home inventories rose slightly after almost three years of decline as builders begin to rebuild inventory to fit consumer demand. The additions to inventory for sale are all in the not-started and under-construction categories as the completed inventory months-on-the-market continues to increase.