Last week’s 27 percent surge in new home sales in March, the biggest advance since April 1963, signals future increases in existing home sales, which rose only 7 percent in March, and may show the real impact of the homebuyer tax credit that expires at the end of this week.
That’s because new home sales reported by government agencies are closings. Existing home sales reported by the National Association of Realtors represent contracts currently pending on properties. It may take as long as two months for a buyer and seller to close after a contract has been accepted. First-time and existing buyers whose contracts are accepted by May 1 have until June 30 to close if they wish to qualify for the tax credit.
The new homes numbers surprised most economists, who had expected 330,000 new home sales in March after February’s results were revised upward to 324,000, still an all-time low. In fact, sales of new single-family homes in March 2010 were at a seasonally adjusted annual rate of 411,000, according to U.S. Census Bureau and the Department of Housing and Urban Development. Sales exceeded the March 2009 estimate of 332,000.
“Undoubtedly, the tax credit is working,” said Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “Builders are seeing a growing optimism among consumers.”
“The near record-breaking 27 percent increase over February was the result of home buyers taking advantage of the tax credit as well as a carryover of demand that was held back by unusually bad weather in February,” said NAHB Chief Economist David Crowe.
“The increased sales are very welcome news and sales will continue to improve, although we expect them to plateau in late spring and early summer when the credit expires. Following that, the housing momentum will be carried forward by low interest rates, pent up household formations, excellent affordability conditions and a budding employment growth,” Crowe said.
“It shows that the tax credit still has some punch, and we will probably see some better sales numbers for April,” said Mark Zandi, chief economist for Moody’s Economy.com. But “if we don’t get more jobs, the housing market is going nowhere.”