By Kris Hudson And Josh Mitchell
The spring home-selling season is off to a strong start when
judged against last year, with a double-digit sales increase this
March and growing builder optimism offering the latest signs that
the housing market is moving past a sluggish stretch.
Sales of newly built homes declined by 11.4% in March from their
red-hot pace in February, which itself registered as the strongest
month for sales in seven years, to a seasonally adjusted annual
rate of 481,000, according to Commerce Department figures released
Thursday.
However, the March tally represents a 19.4% increase from the
sales pace of March 2014. Even more broadly, the 129,000 newly
built homes sold in this year's first quarter represent a 21.7%
gain from the same period of 2014.
"It's a normal spring pickup, and it's a stronger market than
last year, " said John Burns, chief executive of housing research
and consultancy firm John Burns Real Estate Consulting Inc. in
Irvine, Calif., who predicts U.S. new-home sales for all of 2015
will amount to an 11% gain from 2014.
Overall, many multistate home builders have reported
double-digit percentage gains in sales so far this year, including
Meritage Homes Corp.'s announcement Thursday of a 30% gain during
the first three months of the year compared with the year-earlier
period.
PulteGroup Inc., among the top three U.S. builders by homes
sold, on Thursday reported that its 5,139 sales orders in the third
quarter marked a 6% increase from a year earlier.
Pulte CEO Richard Dugas Jr. said sales this year have gained
momentum due to a combination of sustained, strong job growth,
mortgage rates that have remained below 4% since November, slightly
less expensive fees on mortgages backed by the Federal Housing
Administration and nascent wage growth.
"Our expectation is that the strengthening of demand is
sustainable and should drive new-home sales for all of 2015," Mr.
Dugas said Thursday morning on a conference call with
investors.
Other large, publicly traded builders reported heftier gains for
this year's first three months. NVR Inc., parent of Ryan Homes,
said Tuesday that its first-quarter sales increased by 18% from a
year earlier to 3,926 homes. On Thursday, M/I Homes Inc. said its
first-quarter sales increased by 13% to 1,108 homes. And D.R.
Horton Inc. on Wednesday reported a 30% gain during the first
quarter.
Several closely held builders and developers also say they're
seeing gains. Lance Wright, a partner in Texas home builder
CastleRock Communities LP, said sales increased by 20% in March
from a year earlier to 179 in CastleRock's communities open for at
least a year. Crescent Communities LLC, a Charlotte, N.C.-based
developer with 15,000 lots across seven states, reported that home
builders' demand for home lots is "definitely greater" than last
year.
"Last year's spring selling was generally disappointing for home
builders," said Todd Mansfield, Crescent's president and CEO. This
year, "we've seen increases in lot pricing, and that is indicative
of heightened demand and scarcity of inventory."
Many economists and analysts project a solid but more moderate
gain for this year in comparison to a year ago, when sales were
essentially flat.
Other reports suggest the broader housing market is picking up
after a sluggish winter. Existing-home sales -- the bulk of the
market -- rose 6.1% in March to the highest level in a year and a
half, the National Association of Realtors said Wednesday.
To be sure, the new-home market has a long way to go before it
reaches normal levels of production. The national sales pace in
March amounts to just 66.3% of the market's average annual output
since 2000. And the possibility remains that economic shocks, such
as a rapid rise in interest rates, could stall sales momentum this
year.
A sustained recovery in the new-home market could influence the
broader economy, given that home construction typically accounts
for 5% of U.S. gross domestic product but has languished at roughly
3.1% in recent quarters as the industry struggled through a slow,
fitful recovery. Buyers were deterred in recent years by previously
weak job growth, mounting student debt, tight
mortgage-qualification standards and steep price increases in 2013
and 2014 as builders focused on constructing more expensive houses
for better-heeled, creditworthy buyers.
The past year has brought improvements on many of those fronts.
Many large builders have dramatically slowed their price increases
as some now are building a greater volume of less-expensive houses
for the slowly strengthening entry-level market. The median price
of a newly built home declined in March for the fourth consecutive
month to $277,400, according to the Commerce Department.
Doug Duncan, chief economist for Fannie Mae, said wage growth
for young would-be home buyers finally has shown slight gains of
late. "If that is sustained, I think you'll see more construction
in the entry-level space, " he said Thursday.
New-home sales traditionally reflect about one-tenth of all home
purchases, and Commerce's monthly estimates often are revised as
more data becomes available. The March figure has a margin for
error of plus or minus 18.6%.
Economists surveyed by the Wall Street Journal had predicted
that March sales would fall to an annual rate of 520,000, but they
fell much further from February's lofty tally. Still, Thursday's
report showed sales in prior months were stronger than previously
estimated, with Commerce on Thursday revising up its numbers for
the past three months.
Write to Josh Mitchell at joshua.mitchell@wsj.com and Eric
Morath at eric.morath@wsj.com
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