By Jeffry Bartash MarketWatch
WASHINGTON — Sales of new U.S. homes fell 4.6 percent in February to mark the biggest drop in two years, the government said Tuesday, though poor weather likely played a big role.
Sales slowed to an annual rate of 411,000 last month from a revised 431,000 in January, which was the fastest pace in more than four years.
The decline in February – a late-winter month often marked by poor weather – was the largest since the same month in 2011. The Northeast, where sales slumped more than 13 percent, was battered by a major snowstorm early in February.
Economists polled by MarketWatch had forecast new-home sales to drop to 417,000 last month on a seasonally adjusted basis.
Sales also fell 9.7 percent in the South and 2.1 percent in the West, the Commerce Department said. The only region to see an increase was the Midwest, where sales climbed 13.7 percent.
Sales nationwide are still 12.3 percent higher, however, compared to one year earlier, and economists expect purchases to accelerate in 2013. Ultra-low interest rates and a gradually improving economy are drawing more buyers into the market, as are rising prices. Some customers want sign contracts before they rise any further.
“Potential home buyers are entering the market now instead of later because they are afraid that prices will shoot up if they wait,” economists at IHS Global Insight wrote in a report.
The median price of new homes, for example, climbed 3 percent to $246,800, the government said. And another report released Tuesday, known as Case-Shiller, showed that prices rose in January at the fastest clip in more than six years, a sign that home buyers are becoming more active.
Even a surprisingly large drop in the consumer confidence index in March probably won’t do much to slow the pace of sales. In an otherwise negative report, some 5.6 percent of consumers said they plan to buy a home within six months compared to 3.8 percent in February.
The supply of new homes available for purchase, meanwhile, rose to 4.4 months at the current sales rate from 4.2 months because of the pause in sales in February.
The number could continue to rise as builders ramp up construction to meet rising demand. Permits to build new single-family homes have increased sharply since last summer, rising to an annual rate of 600,000 in February.
Sales for January were revised down from an initial read of 437,000, based on more complete information collected by the government.
The sale of new homes sank to a modern low of 306,000 in 2011 before rising last year to 367,000. Economists expect sales to reach around 450,000 in 2013, though that is two-thirds below a record 1.28 million in 2005, near the end of a housing bubble.
An annual sales pace of around 700,000 or so would be considered healthy.