The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

• Sales of new homes rocketed up 27 percent in March (WaPo)
• New-home sales rise fastest in 47 years (CNNMoney)
• Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history.

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push Chicago home prices higher throughout the coming months.

It’s no wonder builders are bullish on the economy.

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Winter has been tough for home sales.

After a big drop of 17% December, the January Existing Home Sales report yielded a 7% slide.  An “existing home” is a home not being resold by a previous owner.  It essentially excluded only new construction.

Existing Home Sales data on an annualized and adjusted basis shows:

1. 1. 1. Sales volume is at its lowest levels since June 2009
      2. Sales volume fell below its 12-month rolling average
      3. Home supplies are at a 5-month high

This mirrors the data from the government’s New Home Sales data released last week.  That report put new home sales at a 40-year low and showed new homes supplies higher by an entire month.

This is not a crisis and hasn’t moved housing off of its rebound.  Home sales are always cyclical and outside forces always influence the market.  Now is no exception.

For one, home sales were so high in October and November due to the original November 2009 first time home buyer tax credit expiration.  Many buyers shifted out of December/January and into October/November.  This is a natural reason for the dip.

Over the long-term trend, the numbers came in near to what you’d expect as a rolling average.  A smaller, but important part was that January’s weather was awful from Mexico to Canada.  That will slow down home sales.

We’re seeing higher activity in February and March.  It’s unlikely that we’ll see a repeat of last Apri-November’s run, but there are enough buyers to support this housing rebound. The good news of the sagging sales reports is that today’s buyers may find home prices are lower and sellers are more willing to negotiate.

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• Pending Home Sales Recover
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