Both Bloomberg and the Financial Times have prominent stories on the truly terrible existing home sales results for March. The National Association of Realtors announced that sales fell 8.4% in March, following a 3.7% rise in February. Price declines also worsened in 20 major cities. Some of the fall can be attributed to crappy weather, but the volume drop is close to twice the forecast level of 4.3%.
Both stories also noted falling consumer confidence. From Bloomberg:
Consumer confidence declined to the lowest level in eight months in April, undercut by concerns about rising gasoline prices and the wave of mortgage defaults. The New York-based Conference Board’s index dropped below last year’s average of 105.9.
This year’s 23 percent increase in gasoline prices is taking a bite out of Americans’ wallets, and the lingering housing slump threatens to erode their wealth. Fed policy makers are counting on an expanding job market to keep consumers spending.
While there is some hope that home sales could improve with the weather, Calculated Risk points out that it is pretty unlikely for existing home sales to reach the level forecast by NAR as recently as April 11;
To reach the NAR forecast (revised downward on April 11 to 6.34 million units), sales will have to be at 2006 levels for the remainder of the year. Based on the coming impact from tighter lending standards, we can probably say the recent NAR forecast is “no longer operative”.
My forecast was for sales to be between 5.6 and 5.8 million units (shown as 5.7 million). Right now I think the risks are to the downside for my forecast.
Note also that the April 11 NAR forecast was the first time that NAR projected a decline in housing prices of 0.7%. The fall in sales volume implies the estimate for the price decline may also be too low.
Update: A further comment from Brad DeLong, who read the AP report via the New York Times (the AP excerpt comes first):
There was weakness in every part of the country in March. Sales fell by 10.9 percent in the Midwest. They were down 9.1 percent in the West, 8.2 percent in the Northeast and 6.2 percent in the South. “The negative impact of subprime is considerable,” Lereah said. “I expect sales to be sluggish in April, May and June.”
Ummm… if sales are down by 9.1% in the West–which means California, Arizona, Nevada, Oregon, Washington–how can that have been due to bad weather in February? We don’t have “weather.” Couldn’t the AP have asked that of Mr. Lereah?
