New Home Sales Exceed Expectations

New home sales numbers were reported today, and they came in 30% higher than what had been forecast. The median forecast in a Bloomberg Survey of economists had predicted an annual pace of 480,000 new home sales. But April’s number didn’t continue the predicted downward trajectory, and instead showed a 0.6% climb from the prior month’s reporting. The annualized pace after April’s reporting is 623,000 new home sales for the year.

This however is not to state that the housing market is booming. New home sales, on the national level, outpaced some very low expectations. But for us in California, we must take this news with a grain of salt. Of the four U.S. regions, three of them saw strong gains in April when compared to March. The South and the Midwest both experienced gains of 2.4% month over month. The Northeast saw an 8.7% improvement. But in the West, April numbers came in 6.3% lower than they had been in March. In the big picture, housing is showing promising signs that it will be one of the economic bright spots for the year. But specifically in the West, the waters remain a bit choppy.

Unlike the prior economic recession when housing was the catalyst, I believe housing will play an important role in helping the economy exit the recession. Mortgages continue to be historically low, and predictions are for those numbers to remain so into the foreseeable future. Demand continues to outpace supply, and the low interest rates are an influencing factor for that imbalance to remain unchanged for a few more months. I continue to experience multiple offer situations on behalf of my clients in Sacramento. The big unknown to me remains the unemployment numbers. The most recent analysis I’ve seen claims that the high unemployment rate will have a more negative impact on the rental market than it will have on the sales market. It is hard for me to imagine how so many people can lose their jobs and it not ultimately effect both sales and rentals. My advice remains unchanged - if I were a seller, I’d take advantage of the current market conditions of low rates and few competing homes. If I were a buyer, I’d be disciplined in my approach and have all my ducks in a row so I could make strong offers when opportunities arise.