New home sales plunge in March

New home sales plunged in March, taking the biggest drop in a year as the housing sector continues a slow climb out of the doldrums. 

Sales fell 7.1 percent last month to a seasonally adjusted annual rate of 328,000 units, after a 7.3 percent increase from the revised 353,000 rate in February, the Commerce Department said Tuesday.

"The March decline is from a stronger-than-expected sales pace in February, and looking at the first quarter as a whole, sales are up 3.7 percent from the fourth quarter of 2011," said David Crowe, chief economist, National Association of Home Builders. 

"This is exactly the kind of modest, but substantive, growth that we are expecting to see in the year ahead along with gradual firming of the economy and job market," he said. 

The February figure was upwardly revised from a drop of 1.6 percent.

Still, sales are 7.5 percent above the March 2011 estimate of 305,000.

Sales picked up during the warm winter and some housing experts have said the normal boost of spring sales have been spread out over the past several months. 

"Some new home sales that would have happened this March were likely pulled forward as a result of exceedingly good weather conditions across much of the country in February, when we recorded the quickest sales pace since the end of the home buyer tax credit," said Barry Rutenberg, chairman of NAHB. 

"The bottom line is that builders in many markets are reporting more interest among prospective buyers, with the main sticking points for sales right now being access to credit for builders and buyers, and problems with obtaining accurate appraisals," he said. 

The median sales price was $234,500 in March, down 1 percent from the February price, while the average sales price was $291,200.

New home sales are less than half of the 700,000 that economists say represent a healthy market. 

At the end of March homes available for sale hit a record-low 144,000, representing a supply of 5.3 months at the current sales rate as builders have slowed construction amid the availability of much cheaper foreclosures. 

Regionally, sales activity was mixed in March, with the Northeast and South posting gains of 7.7 percent and 3.1 percent, respectively, while the Midwest and West registered respective 20 percent and 27 percent declines.

A separate report, the Standard & Poor's/Case-Shiller home price index showed on Tuesday that prices dropped 0.8 percent, the sixth straight month of declines as prices fell in 16 of the 20 cities in February. 

Meanwhile, another report showed that housing prices rose 0.3 percent on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly index. 

January's prices were revised downward to reflect a 0.5 percent decrease. 

For the 12 months ending in February, prices rose 0.4 percent, the first 12-month increase since the year between July 2006 and 2007. 

The index, which is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac, remains 19.4 percent below its April 2007 peak and is roughly the same as the January 2004 index level.

New homes are only about 10 percent of the housing market but have a much bigger effect on the economy, generating three jobs a year and about $90,000 in tax revenue per unit, according to NAHB.