Instant View: New home sales rise sharply in March

NEW YORK (BestGrowthStock) – Sales of newly built U.S. single-family homes rebounded strongly in March to touch their highest level in eight months as buyers rushed into the market to take advantage of a homebuyer tax credit, a government report showed on Friday.

KEY POINTS: * The Commerce Department said sales surged 26.9 percent, the largest advance since April 1963, to a 411,000 unit annual rate, breaking a four-month slide. * February new home sales were revised up to a 324,000-unit pace from 308,000 units previously. * Analysts polled by Reuters had expected new home sales to increase to a 330,000-unit rate.

COMMENTS:

KEVIN CARON, MARKET STRATEGIST, STIFEL, NICOLAUS & CO, FLORHAM PARK, NEW JERSEY:

“It’s quite a strong report. We noticed also the National Association of Home Builders survey recently showed some very strong improvement, particularly in the present orders component of their index. So what you’re seeing is a decent amount of activity in the month of April. That said there’s been a lot of talk about how long the $8000 tax credit will be around for.”

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR’S RATINGS SERVICES, NEW YORK:

“We talked about how sales were depressed in January and February so these are make-up sales. When the first quarter numbers are taken together, they are still quite good, but it’s not as good as what the March number shows.

These numbers are looking good but just how good we don’t quite know because of the weather and the first-time home buyer credit. Inventory is moving toward more normal levels, but we could see a dip (in sales) after the credit expires.

When you take all the numbers we have received, they probably won’t change the Fed’s mind about raising rates. The recovery may be moving a bit faster than what the Fed has thought. You could see a rate hike at the end of the year if these numbers continue to come in this strong.”

HOWARD SIMONS, STRATEGIST, BIANCO RESEARCH, CHICAGO

“March is nearing the end of the homebuyer tax credit period, so people are jumping in as much as they can.

“That, and the market really only had one way to go.

“But it does show us that the housing market definitely continues to thaw out.”

PIERRE ELLIS, SENIOR ECONOMICS, DECISION ECONOMICS, NEW YORK:

“New home sales were strong and that’s a reflection of the looming deadline for the home buyers tax credit which is April 30. These numbers track the signing of the contract. But there is some genuine firmness, also, because you see upward revisions of five to seven percent in the January and February numbers which says the payback for the first home buyers credit back in the fall was not quite so severe, indicating that underlying demand is a bit sturdier than thought. This is not a breakthrough, but it’s reassuring that the fundamental willingness of people to buy houses has not been devastated to the degree it once seemed. There will be a payback in these numbers after April, but the lingering message is that under the surface the trend is probably improving. April numbers should be even stronger than March. The downside risk to the economy is lessened further.”

DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:

“It was a pretty impressive new home sales rise. The special factors to note are that the weather improved from a cold January and February and also there is the tax incentive for first time buyers that is going to expire. So there were some special factors. Whether this is sustainable is uncertain, but it is certainly an impressively strong report so you have got to be encouraged by that.

“The housing market is still very weak, but there has been a lot of volatility recently because the tax incentives have been coming and going. But I would say there is an underlying modest uptrend there. It is difficult to gauge the underlying trend because there is so much short-term volatility but I think it is upward.”

KIM WHELAN, ECONOMIC ANALYST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:

“No doubt about it, this report was definitely good news, but it is also not time to break out the champagne bottle. Weather problems went away in March and it makes sense that we saw a huge jump in the south because the weather tends to get better earlier in that region. The first-time home buyer tax credit continued to boost sales, but there are also other factors playing a role, such as low mortgage rates. We could get payback in April as mortgage rate move higher and that could hurt affordability and dampen sales.

“The underlying trend in housing is still very weak, but March’s gains are welcomed nonetheless. We are at a point in housing where we are in a recovery mode, but there are still concerns about the speed and sustainability of it. We will probably not see real strength until 2012. You have to remember, sales climbed off of a very low base, so the month-over-month jump can be misleading. It looks like we are improving rapidly, but we are merely climbing out of a hole and we are certainly not on the verge of another housing boom.”

JAMES COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, COLONIAL HEIGHTS, VIRGINIA:

“It’s a fantastic number. You are starting to see the surge from the homebuyers tax credit come into the data.

“These are contracts signed, so we probably have one more month, maybe two, of these data being stronger and then we will have to see if there is a fall off or not. New home sales on the construction side have really picked up.

“This will have no impact on the Fed’s policy. Unemployment

remains the key driver of the Fed’s policy at this point.”

MARKET REACTION: STOCKS: U.S. stocks (Read more about the stock market today. ) extend gains after surge in new home sales data. BONDS: U.S. Treasury debt prices hit session lows. DOLLAR: U.S. dollar hits session high versus yen.

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Instant View: New home sales rise sharply in March