Home Sales are Down, but Spring Brings Hope to the Housing Market

by on April 25, 2014Madhusmita Bora

Single-Family Home Sales Drop

The housing market continues to have its ups and downs. While the industry celebrates positive numbers, the negative sales figures often bring about disappointment.

Last month, sales of U.S. family homes dropped to the lowest in eight months. According to the Commerce Department, new home sales tumbled 14.5 percent to a seasonally adjusted annual rate of 384,000 units. That’s the second straight month of decline, and the biggest drop yet since July last year. On a year-over-year basis, sales dropped 13.3 percent, the largest year-on-year decline since April 2011.

Home sales dropped last month, but the real estate industry is projecting a positive turnaround with warmer spring weatherThe report comes in the wake of an unusually cold winter that battered most regions of the country. Tighter inventory and a spike in mortgage rates also cut down activity in the market. Because of stricter lending rules, many new buyers can’t qualify for loans and are increasingly getting left out of the market. The sluggish economy is also keeping a lot of buyers at bay.

All these factors have hurt home sales. In turn, they have also hurt the economy.

“The rise in interest rates and prices of new homes is leaving some potential buyers with sticker shock,” Bill Banfield, vice president at Quicken Loans in Detroit, told Reuters.

“The weak tone of this report is a bitter pill for those, including ourselves, who have been looking for signs of a spring thaw in the housing recovery,”  Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.

The ripple effects of the blow to sales have been felt elsewhere. Housing stocks fell on the dour report, with the S&P 500 Homebuilding Index ending down about 1.1 percent, according to Reuters. Even an index for the smaller builders registered a loss at closing.

New home sales primarily dropped in the South and Midwestern regions, where an extended winter had a big impact. Sales also dipped in the West. In the Northeast, positive gains were made, but it wasn’t enough to make up for the loss in other areas.

Will Warm Weather Bring Better News?

Global financial services company UBS believes that with spring here, we will have better numbers from the housing market.

“Looking ahead, we expect a sharp spring rebound in quarterly average U.S. housing starts following the exceptionally frigid winter,” Maury Harris, UBS chief U.S. economist, wrote in a recent note, according to Yahoo Finance.

The company is optimistic about a good showing in the upcoming months and is raising its expectations.

“U.S. housing starts in Q1 were restrained by especially inclement weather … We are raising our Q2 annualized housing starts forecast to a 1.15 million annualized pace versus our earlier 1.10 million forecast. Also, we are boosting our Q3 projection from 1.15 million to 1.22 million,” Harris wrote.

Others agree that better times are ahead for the market.

“We went through this soft patch over the winter, largely due to the weather. We’ve seen autos largely rebound already, with good numbers in March, but most of the housing statistics continue to be pretty lackluster. So we do think things will start to snap back,”Andrew Burkly, head of institutional portfolio strategy at Oppenheimer Asset Management, told Yahoo.

{ 3 comments… read them below or add one }

Edward Ride June 27, 2014 at 3:39 am

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Dionis Padron April 28, 2014 at 3:02 am

good aritcle but The housing market was slammed by the unusually cold and snowy winter, but higher mortgage rates, a run-up in prices and a shortage of properties that limited options for buyers have also cut into activity.

New home sales last month dived in the Midwest and the South, where unusually cold weather lingered early in the month. They also fell in the West. While sales in the Northeast rose, they failed to recoup even half of the prior month’s 33.3-percent plunge.

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JithinCedar April 28, 2014 at 2:08 am

Single family home sale may be down, but remember they are far better as investment option compared to bigger flats or apartments

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