Pulling a brick out of the foundation:
thestreet.com
New Home Sales Plunge, but Little Panic Detected
By Diane Hess
Staff Reporter
02/27/2002 02:46 PM EST
New home sales fell in January to their lowest level since June 2000, possibly
offering a sign of weakness in what has been a very strong market throughout the
economic downturn. Still, most experts seemed willing to wait for longer-term data
before drawing any conclusions about the health of the housing sector.
Sales of new homes tumbled 14.8% to a seasonally adjusted rate of 823,000 units
in January from a seasonally adjusted pace of 966,000 in December, the
Commerce Department said on Wednesday.
The South had the biggest decrease in new home
sales, which fell 22% to 353,000 units from
453,000 units. "Only the South experienced a
really low level of sales," said Joel Naroff, president
of Naroff Economic Advisors, an economic
consulting firm based in Holland, Pa. "I don't know
whether this is an aberration, or if there is a trend
developing."
In the meantime, Naroff was willing to take a
wait-and-see approach about Wednesday's news. "I'm not coming to a conclusion
about the report yet, but it's obviously a red flag," he said.
The second-largest drop was in the West, where sales fell 17% to 235,000 units
from 283,000 units. The consensus estimate called for total new home sales of
950,000 units in January.
Peter Kretzmer, chief economist at Bank of America, wrote in a research note that
economic trends contributed to the decline. "New home sales tend to be rather
volatile from month to month, but rising mortgage rates -- which have subsequently
been reversed -- and slower employment growth likely played some part," he wrote.
The weak new home sales data follows a strong existing home sales report earlier
this week. Sales of previously owned homes jumped 16.2% to a record annual rate
of 6.04 million units in January.
The difference between the two reports also may have to do with the way they are
calculated. New home sales are recorded when a contract is opened, while
existing sales are tallied when a contract is closed.
"New home sales often lead existing home sales by a month," said Christopher
Low, an economist at First Tennessee Capital Markets, who said the report may
just be a pullback from unusual strength.
Shares of several major homebuilders hit 52-week highs earlier in the session, but
in recent trading, they were lower. Pulte Homes (PHM:NYSE - news -
commentary - research - analysis) was off 82 cents, or 1.6%, to $50.22, while D.R.
Horton (DHI:NYSE - news - commentary - research - analysis) was lower by 27
cents, or 0.7%, to $38.92. Lennar (LEN:NYSE - news - commentary - research -
analysis) was off $1.48, or 2.6%, to $54.70. M/I Schottenstein Homes
(MHO:NYSE - news - commentary - research - analysis) was losing 90 cents, or
1.5%, at $57.65.
"The good news for the homebuilders is they anticipated a collapse, which never
came," Low said. "So the supply of new homes is low compared to prior economic
recovery periods."
But the bad news is, "there is going to be a pullback from last year's levels," he
added.
Toll Brothers (TOL:NYSE - news - commentary - research - analysis) -- which
Tuesday reported much better-than-expected first-quarter results and suggested it
was immune to the recession -- was down 24 cents, or 0.5%, to $47.01. |
