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March Housing Sales Drop Maximum Since 2015: More Pain Ahead?
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U.S. existing home sales slid 8.5% in March to a seasonally adjusted annual rate of 5.27 million from February’s 5.76 million units. Sales of previously owned homes marked the highest monthly decline since November 2015. Discouragingly, the metric lagged market expectations by 0.4%, which indicates that buyers reacted worse than expected.
On a positive note, existing home sales — which account for more than 90% of total U.S. home sales — inched up 0.8% year over year for the ninth straight month, according to the National Association of Realtors’ (“NAR”) latest monthly release. Undeniably, the housing market was robust in the early part of March, when COVID-19 didn’t take the shape of pandemic. The resilient market conditions were backed by low mortgage/interest rates, strong job market and wage growth, along with fairly unseasonably warm weather.
However, sales activity took a drastic turn during the latter part of the month, as states and local government authorities issued “stay-at-home” or “shelter-in-place” orders to contain the pandemic’s spread.
Weak Sales Despite Strong Inventory
In March, sales from the four major regions — namely Northeast, Midwest, West and South — registered a decline, with the West suffering the most. Northeast sales — which account for the majority of existing home sales — fell 7.1% from a month ago to 650,000 units. Sales in the Midwest, West and South declined 3.1%, 13.6% and 9.1%, respectively, from the month-ago figures.
On a year-over-year basis, sales from the Northeast and West regions reported a decline of 3% and 0.9%, respectively. However, sales from the Midwest and South rose 4.2% and 0.9%, respectively, from March 2019.
Median sales price in March rose 8% from the comparable year-ago period to $280,600, marking the 97th straight month of year-over-year increase. Median home prices grew in all the regions served, with the strongest price gain recorded in the Northeast and Midwest.
Total housing inventory at the end of the reported month was 1.5 million units, up 2.7% from February readings but down 10.2% from 1.67 million reported in the prior year. Moreover, it will take just 3.4 months to deplete the current supply of homes, higher than 3 months noted in the prior month but lower than the last year’s 3.8 months.
In March, first-time buyers were responsible for 34% of sales, up from 32% registered in February and 33% in March 2019.
The uptick in inventory indicates that builders are still busy in building homes to meet the demand. In fact, first-time buyers are still able to purchase homes despite social distancing restrictions. However, there is need for more sellers to list their homes through virtual home tours, e-signings, and other innovative and secure methods.
What Awaits for Housing?
The March downturn is setting the tone for the future of the housing industry. Since the pandemic's impact was felt only in the latter half of the month, the complete effect of the lockdown of operations is yet to be seen in April’s home sales report, which is scheduled to release on May 21.
Apart from existing-home sales, housing starts — another important indicator of the housing industry’s prospects — dropped 22.3% from February, marking the steepest month-over-month drop since March 1984. (Read more: Housing Starts Feel Coronavirus Pinch: Worst Decline in 36 Years)
April’s builder confidence data is also reflective of the industry’s gloomy prospects. Per the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Apr 15, confidence level among single-family builders recorded the highest monthly decline in the index’s 30-year history and lowest reading since June 2012. (Read more: Builder Confidence Nosedives in April Amid Coronavirus Scare)
Historically, March and April used to be the strongest periods for home sales, as buyers traffic increases during the spring selling season. However, currently, with most of the country under strict restrictions, the home-buying season may be pushed into the summer or may not happen at all. Without any doubt, the market condition for the upcoming months is vulnerable as the impact of the pandemic is still unpredictable.
Lawrence Yun, NAR’s chief economist said, “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”
Shares of the industry have declined 33.5% in the year-to-date period compared with the Zacks Construction sector and S&P 500 composite’s 30.7% and 15.1% fall, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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March Housing Sales Drop Maximum Since 2015: More Pain Ahead?
U.S. existing home sales slid 8.5% in March to a seasonally adjusted annual rate of 5.27 million from February’s 5.76 million units. Sales of previously owned homes marked the highest monthly decline since November 2015. Discouragingly, the metric lagged market expectations by 0.4%, which indicates that buyers reacted worse than expected.
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On a positive note, existing home sales — which account for more than 90% of total U.S. home sales — inched up 0.8% year over year for the ninth straight month, according to the National Association of Realtors’ (“NAR”) latest monthly release. Undeniably, the housing market was robust in the early part of March, when COVID-19 didn’t take the shape of pandemic. The resilient market conditions were backed by low mortgage/interest rates, strong job market and wage growth, along with fairly unseasonably warm weather.
However, sales activity took a drastic turn during the latter part of the month, as states and local government authorities issued “stay-at-home” or “shelter-in-place” orders to contain the pandemic’s spread.
Weak Sales Despite Strong Inventory
In March, sales from the four major regions — namely Northeast, Midwest, West and South — registered a decline, with the West suffering the most. Northeast sales — which account for the majority of existing home sales — fell 7.1% from a month ago to 650,000 units. Sales in the Midwest, West and South declined 3.1%, 13.6% and 9.1%, respectively, from the month-ago figures.
On a year-over-year basis, sales from the Northeast and West regions reported a decline of 3% and 0.9%, respectively. However, sales from the Midwest and South rose 4.2% and 0.9%, respectively, from March 2019.
Median sales price in March rose 8% from the comparable year-ago period to $280,600, marking the 97th straight month of year-over-year increase. Median home prices grew in all the regions served, with the strongest price gain recorded in the Northeast and Midwest.
Total housing inventory at the end of the reported month was 1.5 million units, up 2.7% from February readings but down 10.2% from 1.67 million reported in the prior year. Moreover, it will take just 3.4 months to deplete the current supply of homes, higher than 3 months noted in the prior month but lower than the last year’s 3.8 months.
In March, first-time buyers were responsible for 34% of sales, up from 32% registered in February and 33% in March 2019.
The uptick in inventory indicates that builders are still busy in building homes to meet the demand. In fact, first-time buyers are still able to purchase homes despite social distancing restrictions. However, there is need for more sellers to list their homes through virtual home tours, e-signings, and other innovative and secure methods.
What Awaits for Housing?
The March downturn is setting the tone for the future of the housing industry. Since the pandemic's impact was felt only in the latter half of the month, the complete effect of the lockdown of operations is yet to be seen in April’s home sales report, which is scheduled to release on May 21.
Apart from existing-home sales, housing starts — another important indicator of the housing industry’s prospects — dropped 22.3% from February, marking the steepest month-over-month drop since March 1984. (Read more: Housing Starts Feel Coronavirus Pinch: Worst Decline in 36 Years)
Currently, the economic backdrop for the Zacks Building Products - Home Builders industry, which includes leaders like Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) , Toll Brothers, Inc. (TOL - Free Report) , PulteGroup, Inc. (PHM - Free Report) , NVR, Inc. (NVR - Free Report) , Meritage Homes Corporation (MTH - Free Report) and KB Home (KBH - Free Report) , is undoubtedly dismal.
April’s builder confidence data is also reflective of the industry’s gloomy prospects. Per the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Apr 15, confidence level among single-family builders recorded the highest monthly decline in the index’s 30-year history and lowest reading since June 2012. (Read more: Builder Confidence Nosedives in April Amid Coronavirus Scare)
Historically, March and April used to be the strongest periods for home sales, as buyers traffic increases during the spring selling season. However, currently, with most of the country under strict restrictions, the home-buying season may be pushed into the summer or may not happen at all. Without any doubt, the market condition for the upcoming months is vulnerable as the impact of the pandemic is still unpredictable.
Lawrence Yun, NAR’s chief economist said, “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”
Shares of the industry have declined 33.5% in the year-to-date period compared with the Zacks Construction sector and S&P 500 composite’s 30.7% and 15.1% fall, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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