While March had a surge of 27 percent in new home sales, it also recorded a drop of 40 percent in foreclosures. Sales blew past all economists' expectations with the aid of good weather and government incentives.
The Commerce Department reported today that the total amount of new-homes sold in March was 411,000 which was the strongest monthly sales since July of last year as well as being the biggest monthly increase in almost 50 years.
Economists had predicted that sales would be around 330,000 since February's results were around 324,000 due in part to very bad weather throughout most of the nation.
The new-home sales report is based on signed contracts to buy homes and as a result gives economists an idea on how many buyers were out shopping for new homes.
Currently, the government is offering a first-time home buyer tax credit of $8,000 and a $6,500 tax credit for current homeowners who want to buy and move into another property. These incentives expire April 30th and it is not known at this time if they will be extended again.
According to the Internal Revenue Service, to date, close to 1.8 million households have been able to use the credit at a cost of $12.6 billion.
The National Association of Home Builders chief economist David Crowe said, "These robust numbers say the credit is working." He also stated that he predicts that sales will continue to rise through April and should remain stable throughout the remainder of the year.
On the foreclosure front, according to San Diego research firm MDA DataQuick California's foreclosure crisis seems to be slowing with a 40.2% drop in mortgage default notices which is the first step toward foreclosure compared with this same period last year.
These new numbers seem to suggest that the housing market may not be flooded with a new wave of bank repos which has been seen as a big threat to the housing market's recovery.
Furthermore, Southern California home prices jumped 14% last month compared to March 2009, to a median price of $285,000.
In the first quarter of 2009, California loan default notices peaked at 135,431, but since then, the government has put much more pressure on banks to work with homeowners who are behind on their payments and are at risk of going into foreclosure. Thankfully the banks have recognized that flooding the market with a multitude of foreclosures will only weaken the value of the properties they have taken back and must resell.
Given the overall picture 2010 seems to be the year the housing market will finally make a turn-around. However, since the federal tax incentives are set to expire next week and with no plan in sight from the government to extend them, we can only hope that this progress will continue.