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Friday, April 23, 2010

New Home Sales Jump Is Best Since 1963

New home sales jumped up in March at the fastest single-month rate since March 1963. The government report released on Friday said buyers gobbled up new houses ahead of the federal tax credit that is just about to expire.

New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 in March, compared to a revised annual rate of 324,000 in February.

The surprise jump was significantly better than even the most optimistic professional forecasters had thought. The average economist surveyed said that March sales gains would only amount to an annual rate of 330,000.

The rate gain was the biggest in a month-over-month measure since a 31% gain 47 years ago in March 1963.

Gains in the South were especially pronounced. New home sales there were up 43.5%. The Northeast region also saw a massive 35.7% spike.

"It's obvious that homebuyers are rushing in to take advantage of the tax credit that's set to expire," said Robert Dye, an economist for PNC Financial Services.

In a national housing market that still is concerned about oversupply, the March results also produced significantly declining market inventory. The report showed that at the current rate inventory is now at 6.7 months. That is down sharply from over 9 months of inventory in February.

"It's a very good sign to see [the inventory] number down," said Dye. "Firming house prices and an improving jobs market will make recovery felt on Main Street as well as Wall Street," said Dye. "We're headed in the right direction."


  1. Several economists seem to think the new home sales numbers will go back down to record low levels once the tax credit expires. Thoughts?

  2. Bill,

    It really comes down to whether or not you believe that a catalyst (stimulus) will actually have the desired effect.

    A catalyst -- once removed -- rarely leaves the effected system in the state that it was when the catalyst was applied. The most extreme example is a match applied to a dry forest... once the match is removed, don't expect steady state again.

    Economic stimulus applied appropriately can have significantly positive results.

    Will new home sales numbers continue like last month? Doubtful. Will they return to pre-catalyst levels? Also doubtful.


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