New-home sales rise fastest in 47 years

As regular readers know, we’re leery about extrapolating national data onto the Richmond Virginia market (usually because we’re doing better than the national average) but this item from CNN/Money caught our eye.

New home sales improved in March at the fastest single-month rate in 47 years, according to a government report released Friday, as buyers snatched up properties ahead of the tax credit that’s set to expire.
New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 last month, compared to an upwardly revised annual rate of 324,000 in February, the Census Bureau said. The gain snapped a four-month streak of declines.

The big question is: What happens after the tax credit expires?

The Census Bureau data followed a report from the National Association of Realtors on Thursday that showed existing home sales soared nearly 7% in March, as new homebuyers raced to buy up properties before a tax credit expires on April 30.

“It’s obvious that homebuyers are rushing in to take advantage of the tax credit that’s set to expire,” said Robert Dye, senior economist for PNC Financial Services.

We think the key to that question is SUPPLY!

The Census Bureau estimated that 228,000 new homes hit the market in March. At the current sales rate, it would take 6.7 months to sell through that inventory, down sharply from an estimated 9.2 months of inventory in February.

With supply trimmed (due to stepped up sales from the tax credit and a reduction in the number of new homes built), we continue to believe that prices have firmed and that buyers will increasingly be confident that the cost of waiting is higher than the cost of acting. That won’t cause the market to run higher, but it bodes well for a return to normal.

You can read more about this here.

For more information, see Richmond VA New Homes.