New sales of single-family homes in the US fell last month but prices rose to an eight-month high, rounding out a mixed week of data on the property market.
The unexpected drop came as KB Home, one of the country’s largest homebuilders, reported a surprising slowdown in orders that contributed to a worse-than-expected first-quarter loss. The disappointing results sent KB stock down as much as 15 per cent on Friday and dragged other builders including PulteGroup, Toll Brothers and DR Horton.
Total sales of new homes dropped 1.6 per cent from January to February to a seasonally adjusted annual rate of 313,000, the commerce department said on Friday. The sales rate in January was revised down to 318,000 from 321,000. Economists polled by Bloomberg had expected sales to rise to 325,000 last month.
However, sales were up 11.4 per cent from a year ago in an indication that the housing market, which has lagged behind the wider economic recovery, may be turning the corner – albeit at a very slow rate of improvement.
Price data released on Friday also painted a better picture, as median prices rose 8.3 per cent to $233,700. The inventory of houses for sale was unchanged at a record-low 150,000, which would take 5.8 months to sell off at the present sales pace.
Sales and prices have been damped by the glut of houses on the market, many of which are foreclosed or are distressed properties that sell at significant discounts. Sales of previously owned homes, which account for the majority of the market, also edged lower last month, though January sales were revised strongly higher.
“There’s just too much housing stock and not enough people that want to own it. It’s really that simple,” said Leif Thomsen, chief executive of Mortgage Master, a non-bank loan originator. “The younger generation wants to be more mobile, so if the job takes them from Boston to Seattle they don’t have to worry about selling a home.”
The slow growth of demand for new homes among buyers who may have problems securing finance or are unable to sell their current properties has weighed on homebuilders’ confidence. Groundbreakings declined in February from January – perhaps due to unusually warm weather that boosted construction over the winter – but from a year ago, new home starts rose 34.7 per cent.
“It’s tough for a homebuilder to compete with all the inventory that’s there,” Mr Thomsen said.
KB Home’s net orders sank 8.1 per cent to 1,197 in the first three months of the year, missing Wall Street’s forecasts of a rise in demand. The drop was in part the a result of a jump in cancellations to 36 per cent from 29 per cent a year ago, KB said.
The company’s first-quarter loss narrowed to $45.9m, or 49 cents a share, from $114.4m, or $1.49 a share last year. Analysts had forecast a smaller loss of 23 cents a share.
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