As feared, the February housing numbers were not good. Given the unusually bad weather in the South and along the East Coast that month — with record setting snow storms in the Mid-Atlantic region and up into New England — the expectation was that many of the economic statistics would be bad, even on a seasonally adjusted basis, and they were.
Existing home sales fell 0.6% in February from 5.05 million in January to 5.02 million at a seasonally adjusted annual rate. Single-family existing home sales fell even more — down 1.4% — from 4.43 million to 4.37 million. On a more positive note, both total and single-family sales were up on a year-over-year basis — by 7.0% and 4.3%, respectively.
February marked the third month in a row that existing home sales fell since topping out in November. The February decline was partly the result of some existing home sales (closings) that would have taken place in December and early this year being shifted into November to qualify for the first-time home buyer tax credit; but more factors than time shifting and weather were probably responsible for February’s larger-than-anticipated decline in sales.
The extended and expanded credit requires a signed contract by April 30 and settlement by June 30 (see www.FederalHousingTaxCredit.com for details), leaving potential buyers of existing homes four months beyond February to complete a sale. There was a similar delayed reaction to the 2009 credit.
Existing home sales are expected to rise in subsequent months as the June 30 deadline approaches and this likely will be followed by another plateau in mid- to late-summer from the time shifted sales. After the expiration of the credit, overall economic activity should be picking up enough to support the housing recovery.
New home sales (based on a signed contract) also failed to rebound in February despite the looming April 30 contract deadline. February new home sales hit an all-time record low seasonally adjusted annual rate of 308,000, down 2.2% from January’s already low 315,000 sales.
While weather and the November tax credit deadline were partially responsible, builders also cited consumer concerns over job security and stiff competition from sales of foreclosed and distressed homes.
Facing a June 30 delivery deadline, builders are going to find it difficult to add to their current for-sale inventory to accommodate demand stemming from the tax credit. At this point, buyers in the new home market seeking to take advantage of the tax credit will have to take a completed or nearly completed property already in the builder’s inventory.