USA Today
WASHINGTON (AP) — Sales of previously owned homes edged up slightly in March but not enough to keep the inventory of unsold homes from hitting a record high as the once-booming housing market continued to flash signals of a slowdown.
The National Association of Realtors said Tuesday that sales of existing homes edged up a tiny 0.3% last month to a seasonally adjusted annual rate of 6.92 million units.
The March increase followed a bigger 5.1% jump in February with the two months representing the first advances since five consecutive monthly declines.
The median price of a new home rose to $218,000 last month, a gain of 7.4% from a year ago. That price increase was far slower than the double-digit gains turned in last year as the housing boom was peaking.
Another report showed that consumers shrugged off higher gasoline prices in April and sent a widely watched barometer of consumer confidence to its highest level in almost four years.
But the Conference Board warned that if fuel prices continue to rise, it would cast a pall on consumer spending, which accounts for two-thirds of all U.S. economic activity.
The Conference Board said that its consumer confidence index rose to 109.6, up from a revised 107.5 in March. April’s reading was the highest since the index touched 110.3 in May 2002. Analysts had expected a reading of 106.4. Confidence has been on an upswing since November in the aftermath of the Gulf hurricanes, except for a sharp dip in February.
“Improving present-day conditions continue to boost consumers’ spirits,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement. “Recent improvement in the labor market have been a major driver behind the rise in confidence in early 2006. Looking ahead, consumers are not as pessimistic as they were last month.”
Franco added that expectations for the economy and labor market have been trending downward since peaking in 2003, however. She said that “while prices at the pump have yet to impact confidence, further increases could dampen consumers’ mood.”
Analysts said that so far this year home sales are running 4% below the pace set in 2005, a year in which home sales set a record for a fifth straight year. Analysts believe that rising interest rates will result in a drop in sales of existing homes of around 6% this year as the five-year boom in housing slows.
The big question is whether the slowdown is gradual or something more severe which could trigger plunging home prices.
David Lereah, chief economist for the Realtors, said the sales increases over the past two months were a hopeful sign that sales will experience only a slight drop-off this year.
“This is additional evidence that we’re experiencing a soft landing,” he said. “The market clearly is stabilizing.”
By region of the country, sales were up 1.7% in the Northeast and 1.2% in the Midwest but fell 0.7% in both the South and the West.
The inventory of unsold homes rose to 3.19 million units at the end of March, which was the highest total on record. That inventory represented a 5.5-month supply of homes at the March sales pace, which represented the longest period needed to exhaust the inventory since it stood at a 5.6-month supply in July 1998.
Lereah said that the report continued to show a tale of two cities with areas that had been booming experiencing sales slowdowns while more moderate growth regions were still experiencing strong gains.
He said that Houston, Cincinnati, Ohio, and Albuquerque, were still experiencing strong sales gains while Fort Lauderdale, Phoenix and the San Fernando Valley of California were seeing a slowdown in sales.