The Commerce Department reported that new home sales rose 4.7% after a record low January. This came quite unexpectedly and amidst one of the worst housing declines in history. Those cheering suggest there is a bottoming out of the housing numbers, and point to stabilizing mortgage rates for the past few weeks. Many believe interest rates cannot drop any further.
The Problem with February's Housing Numbers
While this is a good start to an expected dismal year, there are still many factors working against a real bottom and possible rebound for the housing industry. February's sales pace is still down more than 40% from this month last year, and January was the lowest on record since 1963. Southern housing markets saw the largest sales gains at 9.7%, and the West followed with a 6.6% rise. First-time buyer tax credits may have contributed to the overall rise as well.
An Abundance of Supply
While results were good for the month, overall, there are a number of factors working against a housing recovery, including excess surplus. There is still a 12.2 month supply of homes left at this current pace, noticeably higher than a 9.2 month supply for February of 2008. An increase in unemployment and rising foreclosure rates has also conspicuously affected home purchases throughout the country as the labor market worsens.
The stance of many economists is still wary. They are uncertain that sales will increase, and their responses signify that there is no true evidence of a market bottom. What is your opinion of the housing data? If you are considering buying a home, are you holding off until there is a clear bottom signal?
