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 The Commerce Department said on Monday new home sales decreased 1.5
percent to a seasonally adjusted annual rate of 511,000 units.
February's sales pace was revised up to 519,000 units from the
previously reported 512,000 units.
New home sales are volatile month-to-month because they are drawn
from a small sample. While sales have now declined for three
straight months, this likely does not signal a slowdown in the
housing market given a buoyant labor market.
"Through some of the short-lived ups and downs in the data, it still
appears that new home sales are trending higher over time," said
Daniel Silver, an economist at JPMorgan in New York.
Economists had forecast new home sales, which account for about 8.7
percent of the housing market, rising to a 520,000 unit-rate in
March. New home sales surged 18.5 percent in the Midwest and climbed
5.0 percent in the populous South.
But sales plunged 23.6 percent in the West, reversing February's
21.7 percent jump, and were flat in the Northeast.
U.S. financial markets were little moved by the data, with investors
on the sidelines ahead of the Federal Reserve's policy meeting on
Tuesday and Wednesday.
The U.S. central bank is expected to kept its short-term interest
rates unchanged, but its statement accompanying the rate decision
will be scrutinized for clues on the near-term outlook for monetary
policy.
The PHLX housing index was down 0.78 percent as shares in the
nation's largest homebuilder, D.R. Horton Inc, dropped 1.25 percent
and Lennar Corp slipped 0.61 percent.
STRONG FUNDAMENTALS
A report last week showed a 5.1 percent surge in sales of previously
owned homes in March.
The housing market is bucking a broadly weak economy, with data such
as trade, industrial production, business spending and retail sales
suggesting the economy lost considerable momentum in the first
quarter after logging a 1.4 percent annualized growth rate in the
fourth quarter.
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First-quarter gross domestic product growth estimates are as low as
a 0.3 percent rate. The government will release the advance
first-quarter GDP estimate on Thursday.
The demand for housing is being fueled by the robust labor market,
characterized by the lowest unemployment benefit claims since 1973,
and mortgage rates near record lows. Labor market strength has
increased employment opportunities for young adults, boosting
household formation.
"With continued improvement in the labor market leading to higher
incomes, and borrowing costs that remain low, the fundamentals
remain supportive. We expect new home sales to advance throughout
2016," said Kristin Reynolds, a U.S. economist at IHS Global Insight
in Lexington, Massachusetts.
But a shortage of properties for sale, which is limiting choice for
buyers and driving up prices, remains a constraint for the housing
market.
While the inventory of new homes on the market rose in March to the
highest since September 2009, new housing stock remains less than
half of what it was at the height of the housing bubble.
At March's sales pace it would take 5.8 months to clear the supply
of houses on the market. That was the most since last September and
was up from 5.6 months in February.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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