March 23, 2012 / 9:15 PM / 7 years ago

UPDATE 3-Signs of recovery grow in U.S. housing market

* New home sales fall 1.6 percent in Feb to four-month low
    * Median price surges 8.3 percent to eight-month high
    * Prices up 6.2 percent from year-ago

    By Lucia Mutikani	
    WASHINGTON, March 23 (Reuters) - The battered U.S.
housing market looks to be on the mend as buyers make a
tentative return and house prices stabilize.	
    Sales of new homes in February fell from January but jumped
more than 11 percent compared with the same month last year and
prices rose, according to data released on Friday
that was in line with other recent signs of a slow recovery.	
    Big challenges lie ahead, most notably in the form of a glut
of unsold properties - many of them foreclosures - and tight
lending by banks. But even if the recovery is slow and bumpy,
the worst of the six-year slump seems to be over.	
    "The housing market is slowly coming back. It's still a
depressed market, but it's getting better. We have a long way to
go," said Patrick Newport, an economist at Global Insight in
Lexington, Massachusetts.	
    New home sales slipped 1.6 percent to a seasonally adjusted
313,000-unit annual rate in February, the lowest since October,
but were up 11.4 percent in year-on-year terms, the Commerce
Department said.	
    The median new home price jumped 8.3 percent to an
eight-month high of $233,700. Compared with February last year,
the rise was 6.2 percent.	
    The report rounded off a week of mixed U.S. housing data and
followed a similar pattern seen in the bigger market for
existing homes - sales also fell in February, but stayed close
to their highest level in nearly two years and prices rose for
the first time on a yearly basis since November 2010.	
    Realtors say they are seeing higher traffic volume and are 
moving more houses off the market than a few years ago.	
    "My listings are selling much more quickly compared to the
past few years, even approaching 2007 pre-crash levels," said
Lindsey Sanders, a Realtor with Muffley & Associates in Atlanta.	
    "I began seeing a meaningful uptick in open house traffic
last summer and it has continued to improve. I think this is a
combination of sellers finally becoming more willing to ask
market prices for their homes instead of bubble-level prices."  	
    Builders tell a similar story. An index measuring confidence
among homebuilders held at a near four-year high this month and
they anticipated an increase in sales over the next six months.	
    While the pace of home construction fell last month, permits
for future projects approached a 3-1/2-year high. Much of the
activity is concentrated in the multi-family segment, as demand
for rentals soars.	
    The recovery remains spotty. According to CoreLogic
, for every two homes sold, there is one that could be
foreclosed. It estimated the so-called shadow inventory of homes
at 1.6 million in January, down from 1.8 million a year ago.	
    KB Home, the fifth-largest U.S. homebuilder, on
Friday said net orders for new homes declined 8 percent in its
first quarter as cancellations rose.	
    "Don't expect this to be a broad-based, rocket-ship
recovery," said KB Homes Chief Executive Officer Jeff Mezger on
an earnings call. "The overall housing market is better, but
this is definitely a localized recovery ... and in some cases,
it's a zip-code-by-zip-code recovery."	
    KB's order decline was in sharp contrast to the strong order
growth reported by other U.S. homebuilders, including D.R.
Horton, Pulte and Lennar, who have
forecast an improving housing market. 	
     While the pace of new home sales held above 300,000 units
for a sixth straight month, they are just over a fifth of their
1.389 million unit peak reached in July 2005.	
    "Mindful that more healing needs to be done, we expect new
home sales in 2012 to post their first annual increase in seven
years, rising 12 percent," said Sam Bullard, a senior economist
at Wells Fargo Securities in Charlotte, North Carolina.	
    Last month, the inventory of new homes on the market was
unchanged at a record low 150,000 units. At February's sales
pace it would take 5.8 months to clear the houses from the
market, up from 5.7 months in January.	
    New home sales last month surged in the Northeast and West
but slumped in the South and Midwest.	
    New home sales account for about 7 percent of the overall
housing market and face stiff competition from the used home
segment despite low levels of stock.	
    "Buyers have been able to take their time as they have
little fear that prices or rates will get away from them.
Mortgage rates, though, are beginning to rise slowly and that
could continue through the rest of the year," said Joel Naroff,	
chief economist at Naroff Economic Advisors in Holland,
    "Add price increases to that and there is a little more
urgency to the decision. So while investors may be disappointed
by this report, I think better times are just about here so be a
little more patient."
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