New-home sales rose 11% last month from February to a seasonally adjusted rate of 300,000 homes, the Commerce Department said Monday. That follows three straight monthly declines. Still, the pace remains far below the 700,000 homes a year that economists view as healthy.
Sales of new homes fell last year for the fifth consecutive year and the market is showing no signs of rebounding. Economists say it could take years before sales return to a healthy pace.
The median price of a new home rose nearly 3% from February to $213,800. New-home prices are about 34% higher than the median price for re-sales. That's more than twice the markup in healthy housing markets.
Builders are struggling to compete with a record number of foreclosures, which have forced down the price of re-sales and made them more of a bargain. The disparity has dragged on the economy. New homes represent a fraction of sales but they have an out-sized impact on the broader economy. Each new home creates an average of three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.
"New housing prices look much less attractive compared to cheap existing stock," said Yelena Shulyatyeva, an analyst with BNP Paribas. "As such, new housing demand will likely remain depressed throughout this year and next."
Many builders are waiting for the glut of foreclosures and other distressed properties to be cleared before stepping up construction. But with 1.2 million foreclosures forecast this year nationwide, according to foreclosure tracker RealtyTrac Inc., a turnaround isn't expected for years.