New-home sales off 1.8 percent in February

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A for sale sign stands in the Old Orchard development outside Houston, Texas. Nationally, homebuilders are struggling through the slowest period of home sales in 25 years.

With some forecasters saying the nation's economic downturn might be nearing bottom, a report yesterday showed that new-home sales declined a relatively insignificant 1.8 percent in February from the same month in 2007.

Though the decline was small, it still put the seasonally adjusted annual sales rate for new homes at 590,000, the slowest pace since February 1995.

The biggest sales drop from January, 40.3 percent, was in the Northeastern United States, the Commerce Department reported.

Sales in the Midwest fell 6.4 percent, but they rose 5.7 percent in the South and 0.7 percent in the West - areas hit hardest by the housing downturn.

For the 12 months through February, sales of new homes fell 28.9 percent nationally and 54.9 percent in the Northeast.

The supply of unsold homes on the market last month was unchanged from January - 9.8 months - still a 26-year high, Commerce reported.

"The 40.3 percent [in the Northeast] completely baffled me," said Joel L. Naroff, chief economist at Commerce Bancorp Inc., of Cherry Hill. "We are the smallest of the four regions, and the weather wasn't bad, so I'm guessing the numbers will turn around dramatically in March.

"Since the same thing happened last year, I can say that I don't believe the Northeast numbers," Naroff said.

To Naroff, the hopeful sign came with the upward revision of annual sales rates for the previous two months.

January's rate was raised to 601,000 from the 588,000 originally reported. December sales were boosted by 19,000.

"Upward revisions tell me that there is more going on than meets the eye, and the market seems to be finding its bottom at 575,000 to 600,000 sales," Naroff said.

Unlike other areas of the country, foreclosures are not adding to the Philadelphia region's unsold inventory, he said.

"The effects are minor," Naroff said, "because this region was never drawn into the housing boom. We were lucky."

Last week's Federal Reserve efforts to stabilize the market for mortgage-backed securities - by cutting interest rates and injecting money into the financial system - have boosted the home-financing business.

"With a drop in the 30-year fixed rate of at least a quarter of a point, we saw a sharp increase in refinance applications, but applications for home purchases also increased over where they have been the last few weeks," said Mortgage Bankers Association vice president Jay Brinkmann.

Economist Patrick Newport of Global Insight Inc., the economic forecasting group in Lexington, Mass., said builders "continue to aggressively price and market new homes."

If the financial markets stabilize, "we expect their efforts to pay off with new-home sales turning around about the middle of this year," he said.

Veteran Main Line home builder Chip Vaughan said he had seen a definite uptick in interested buyers since the beginning of the year.

"We have had solid sales at our two new communities" - the single-family Andover development in Glen Mills near West Chester, which start at $795,000, and Traymore in Rose Valley, with carriage houses starting at $585,000.

"I am just starting to feel as though things are starting to turn," he said. "I believe that housing has to lead us out of this economic malaise."

Meanwhile, President Bush said yesterday that the sagging economy would "come out stronger than ever before" with the help of tax rebates from the recently enacted economic-stimulus package.

"I fully recognize that people are concerned about our economy, but they must understand that this package has yet to fully kick in yet," he said.


Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.