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New Home Sales in Steepest Drop in Two Years

New home sales fell 4.6 percent to a seasonally adjusted annual rate of 411,000 in February, the sharpest drop in two years, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrs/pdf/newressales_201302.pdf reported Tuesday. Economists surveyed by Bloomberg expected a smaller drop to 425,000 from January's originally reported sales of 437,000. January sales were revised down to 431,000.

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At the same time, the months' supply of new homes for sale rose to the highest level since December 2011.

The median price of a new home, according to the Census/HUD report, rose $7,200 in February after falling $20,500 in January. The median price is up 2.9 percent in the last year, the weakest year-over-year gain in eight months.

The average price of a new home rose $18,500 in February, 6.3 percent, the strongest month-over-month gain in both dollar and percentage terms since last August. The average price is at its highest level since April 2008.

The sharp drop in sales combined with the steep price increase suggests builders are facing some price pushback from buyers for new homes even as supplies of existing single-family homes remain at historic lows. Supplies of new homes continue to climb as housing completions--as reported separately by Census and HUD--routinely exceed new home sales.

In February, builders completed 574,000 new single-family homes. In the last year, builders have completed 1.5 million more new single-family homes than were sold.

The new home sales report--unlike the report on existing-home sales--is based on contract signings and reflects economic conditions of the month of the report.

The weak sales report came in the same month the ""buyer traffic"" component of the National Association of Home Builders' ""Housing Market Index"":https://themreport.com/articles/led-by-south-builder-confidence-slips-in-feb-2013-02-19 fell to 32, its lowest level in five months.

It also arrives on the heels of the report last week from the National Association of Realtors that existing-home sale closings ""rose 0.8 percent in February"":https://themreport.com/articles/existing-home-sales-prices-up-in-february-2013-03-21. The NAR's Pending Home Sales Index, which parallels the new home sales report, will be released Wednesday.

Homes with price tags under $300,000 represented 64 percent of February sales, down from 68 percent in January. Homes priced below $150,000 represented 9 percent of February sales, down from 14 percent in January. Homes prices at $400,000 or more represented 22 percent of February sales, up from 18 percent in January. The boost in sales for higher priced homes could mean more construction activity for more expensive homes--reducing the supply of low-end starter homes.

The change in construction activity would be consistent with a shift away from single-family homes to multi-family.

Regionally, sales fell in three of the four Census regions, increasing only in the Midwest (to 58,000 in February from 51,000 in January). Sales fell 20,000 in the South to 186,000; 4,000 in the Northeast to 26,000; and 3,000 in the West to 141,000.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. and again at 9:20 a.m. Eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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