Consumer Confidence Grows, But Home Sales Fall

Despite the fact that consumer confidence surged, sales of new single-family homes in the U.S. fell to a five-month low in February. According to the Commerce Department, sales fell 3.3% to an adjusted annual rate of 440,000 units, the lowest total since last September. January’s revised sales numbers were also lowered to a 455,000-unit pace after initial numbers showed a rate of 468,000.

The severe winter weather was a catalyst for the slowdown, since sales plummeted 32.4% in the Northeast and 1.5% in the South, where the weather was unusually harsh. Sales also fell nearly 16% in the West but actually rose by a strong 36.7% in the Midwest.

“Some of the housing slowdown has been blamed on the harsh weather. But the sector, the main channel through which the Federal Reserve has sought to stimulate the economy via monthly bond purchases, lost momentum last summer following a run-up in mortgage rates,” notes Reuters.

A dwindling supply of homes and rising costs have also attributed to that trend. The number of new homes available this month hit the highest mark since December 2010, but overall inventory is still low. It would take just 5.2 months for the supply to be cleared at the current pace. A six-month supply is generally considered healthy.

But despite those numbers, consumer confidence surged to a six-year high. A report generated by the Conference Board found that its index of attitudes rose to 82.3 from 78.3 in February. The previous high was registered all the way back in January 2008.

“Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead,” said director of economic indicators at the Conference Board Lynn Franco.

”People are still purchasing and upgrading. They have their starter home, and then they move to the next one,” explains Michelle Dohrwardt, office manager at Dodson Custom Homes. “Also, home prices are going back up. Homeowners are able to sell their existing homes, which are no longer sitting on the market forever. This allows them to move and buy a new home.”

In the coming months, it will be interesting to see whether or not high confidence translates to tangible improvements in home sales.

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