US sales of single-family homes rise 11.1% in March

25 April 2011 17:52  [Source: ICIS news]

WASHINGTON (ICIS)--US sales of new single-family homes rose by 11.1% in March from February, the Commerce Department said on Monday, but activity in that core housing sector remains nearly 22% below levels seen a year ago.

In its monthly report, the department said that new home sales last month were at a seasonally adjusted annual pace of 300,000 units, up from the revised February pace of 270,000.

While a welcome change of direction for the long-suffering new home construction sector, the March increase also was seen as a measure of just how far the housing industry has to go in what is hoped would be a slow climb back to normalcy.

David Crowe, chief economist at the National Association of Home Builders (NAHB), said that the March figures “are good news, especially as they came up off the all-time record low pace in February.”

Viewing current new home sales against the recent past, Crowe noted that new home sales data for the first quarter of this year were about the same as the last half of 2010.

That relative flat-line in sales indicates, he said, that “The new home market continues to run at idle at around 300,000 units on an annual basis.”

The annualised March sales figure of 300,000 units was in stark contrast to the pace of new single-family home sales in the housing boom years of 2003-2006 when it was running around 1.2m units/year.

During those boom years, some economists thought that 1m new single-family home sales/year would be the new “floor” for housing construction, meaning that one-family residential construction and sales were not expected to drop below that level going forward.

In March 2010, US sales of single-family new homes were at 384,000 units (also on a seasonally adjusted annual basis), but that better pace was in large part attributed to the federal tax credit stimulus plan that gave home buyers a purchase incentive.

When that incentive programme expired in May of last year, the market for new home sales again turned down and has continued to struggle since.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€11,040) worth of chemicals and derivatives used in the structure or in production of component materials.

The department also noted that the estimate of new single-family homes for sale at the end of March was 183,000, which represented a supply of 7.3 months at current sales rates.

In normal economic times, the inventory of new homes for sale would be in the 3-5 month range.

Looking forward, Crowe said he expects that the US housing industry would recover in time.

“I see housing following an improved economic outlook, which is not a traditional recovery for housing, which usually leads a post-recession recovery,” he said.

“But I do think that housing will recover, and the overall economic outlook is improving,” he said, meaning that a continuing if slow US economic recovery should pull new home construction along as well.

($1 = €0.69)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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