NEW YORK (Reuters) - Sales of newly built U.S. single-family homes unexpectedly rose at their fastest pace in 10 months in February, while prices fell by a record margin from a year ago, a government report showed on Wednesday.
KEY POINTS: * The Commerce Department said sales rose 4.7 percent to a 337,000 annual pace, the fastest increase since April last year, from an upwardly revised 322,000 in January. * Despite the increase, February sales were the second lowest ever after the drop in January to the slowest pace in records going back to 1963, the department said. * Economists polled by Reuters had forecast sales at a 300,000 rate in February.
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
“The rise in new home sales suggests that the drop in mortgage rates and prices has increased affordability enough to bring some buyers back to the market. Guarded optimism for the spring showing season is sustained.
“It’s a favorable turn of events and it looks as if builders are taking it seriously and they’re on the ground and not being foolishly optimistic anymore. New permits data show a sharp pickup in February in the single-family sector so that adds to the optimism for at least a bit of recovery that was created by the February existing home sales figures released Monday. The new home sales figures are the freshest reading on the immediate state of demand.
“ZACH PANDL, ECONOMIST, NOMURA SECURITIES INTERNATIONAL, NEW YORK:
“The rise in new home sales is potentially another one of Chairman Bernanke’s ‘greenshoots’ here. We’re not ready to call a bottom in housing market activity, but you are seeing consistent improvement across several indicators including sales, starts, and even prices of a subset of homes (those with agency-conforming mortgages).
“Housing activity is still at extremely low levels and given the overhang in inventories in the market, we expect only a gradual recovery this year. But the latest data offer encouraging signs that the worst of the declines could be over.
“The Case-Shiller home price index, which includes homes with non-conforming mortgages, has further to fall. And prices of homes with agency conforming mortgages will still continue to slide. But prices are a lagging indicator. They will probably be the last aspect of the housing market to show recovery. It is still very much a buyer’s market.”
CARL LANTZ, INTEREST RATE STRATEGIST, CREDIT SUISSE, NEW YORK:
“It looks like there is some hope that things could be bottoming out a little bit, that low mortgage rates and lower prices are starting to attract buyers. It is encouraging. One month doesn’t really make a trend though, so we are going to have to wait and see, but the tone of the data is starting to look a little better. We might just be bouncing along a floor. The momentum in the data was so bad that you can’t keep falling at that kind of rate forever. Certainly the momentum is improving but there are still a lot of headwinds for the economy.”
TOM SOWANICK, CHIEF INVESTMENT OFFICER, CLEARBROOK FINANCIAL LLC, PRINCETON, NEW JERSEY:
“Another non-recessionary piece of economic news, plus the revision. I hate to repeat myself but it looks like the economy may be bottoming.”
SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO:
“There is consistency in that existing home sales, durable goods and so forth are better than expected. It suggests that while things aren’t getting better in a hurry, they’re not getting worse. The market has been in an encouraged mood lately and this data will help.”
MARKET REACTION: STOCKS: U.S. equity indexes extend gains after new home sales data. BONDS: U.S. Treasury debt prices fall. DOLLAR: U.S. dollar moves lower versus euro.