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NEW HOME SALES DECLINE IN THE U.S.

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NEW HOME SALES DECLINE IN THE U.S.

April 24 2015, 08.25am GMT

STOCK.com

Pulling away from a 7 year high, the sales of new single-family homes in the U.S. declined by 11.4 percent in March.

According to a report by the Commerce Department in the U.S. on Thursday, last month marked the first time in 7 years that the sales of new single-family homes declined.

Data showed that sales rate dropped by 11.4% from 543,000 in February to 481,000 in March. MarketWatch’s economists had earlier predicted a rate of home sales of 504,000 for March compared with 539,000 estimated in February. Despite these weaker than expected results, analysts have cautioned investors not to take this single report on face value and to impact sentiment. The reason is that the government also showed a confidence interval of 18.6 percent for March, a decline of 11.4 percent. This is a clear indication that the government is uncertain whether the sales rate increased or declined last month.

Over the past year, total U.S. new single-family homes sales rose by 19%. Despite this increase, sales are still 40 percent below the long term pace which was set over 20 years. The reason for this decline has been as a result of poor incomes growth.

Added to this, major builders are reported to be running into challenges as seen in earnings reports with the current No.2 home builder, PulteGroup (PHM, -7.93%), releasing first-quarter earnings that were way below the reported earnings during the first quarter last year. Added to this, investors sold D.R Horton shares, the No. 1 builder, after the company reported that executives had reduced their expectations for annual gross margins.

In the Northeast, new single family homes sales in March dropped 33% while in the South and the West, the sales rate fell 16% and 3% respectively. Things were however slightly different in the Midwest where the sales rate rose 6%.

The National Association of Realtors reported earlier this week that used home sales in March reached the fastest pace in eighteen months. This came as a result of used home being less expensive when compared to new homes.

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