New-home sales might have climbed ever-so-slightly in April, but the median price took another big tumble. Meanwhile, mortgage performance continues to deteriorate – even for borrowers once considered safe – deepening the foreclosure crisis. The double-whammy of negative headlines delivered a swift blow to home-builder stocks. Ryland’s (RYL) 9.55% decline led the sector’s plunge, followed by Centex (CTX), Pulte (PHM) and Hovnanian (HOV) each seeing declines topping 7.7%.
With none of the major builders in positive territory, the Dow Jones U.S. Home Construction Index fell 5.14%. “Stagnant. Stuck in the mud. Flatlining. All of these words sum up the current state of the housing market,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research.
Sales of single-family homes increased by 0.3% to a seasonally adjusted annual rate of 352,000 compared to the prior month, the Commerce Department said Thursday.
But March sales were revised lower, falling 3.0% to an annual rate to 351,000, Thursday’s data showed. Originally, the government said March sales fell 0.6% to 356,000.
Economists surveyed by Dow Jones Newswires expected April sales up 2.5% to 365,000. Year-over-year, new-home sales were 34.0% lower than the level in April 2008.
For a new home, the median price dropped in April by 14.9% to $209,700, down from $246,400 in April 2008, the Commerce data Thursday said. The average price fell 19.2% to $254,000 from $314,300 a year earlier. In March 2009, the median price was $202,200 and the average was $257,100.
Prices are being hurt by a glut of unsold houses on the market. At the end of April, there were an estimated 297,000 homes for sale. That’s down from the 310,000 for sale at the end of March.
The National Association of Home Builders said it didn’t take a negative view of data.
“I think we’re doing exactly what I expected, which is bouncing along the bottom,” said David Crowe, the trade group’s chief economist. “It’s what we need to do until we can be sure that the consumer is back in the marketplace in full force.”
That might take some time, as the market is bedeviled by foreclosures. Many buyers are gobbling distressed properties priced cheaply, and passing up on new homes.
And the flow isn’t expected to end anytime soon. The combined percentage of loans in foreclosure and at least one payment past due, meaning the percentage of mortgage holders not current on their mortgages, was 12.07% on a non-seasonally adjusted basis – the highest ever recorded in the Mortgage Bankers Association’s delinquency survey.
The foreclosure rate on prime fixed-rate loans has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures, according to the association. And not all of the borrowers can be helped.
“While mortgage modification programs will help save some borrowers, others are just too far gone,” Larson said. “They lied about their incomes. They have no assets to fall back on. They’re upside down on their homes. And/or they’re losing their jobs. So we’ll be coping with an elevated level of foreclosures for some time.”
Crowe agreed, adding that unemployment and falling home values remain an issue: “I think we’re going to see it get worse before it gets better.”
