New single-family home sales also rallied in March, jumping a near record 27% from February’s sales pace of 324,000 to a seasonally adjusted 411,000, up  24% on a year-over-year basis. The South showed the biggest gain — 43.5% — and the Northeast was the second most robust region of the country for sales, coming in at 35.7%, although rebounding from  an unusual low in February.

While the approaching expiration date for the home buyer tax credit accounted for much of the bounce back, unseasonably harsh winter weather in February added some pent-up demand to the housing market in March.

In order to qualify for the home buyer tax credit, buyers had to sign sales contracts by April 30 and they are also required to meet a closing deadline of June 30. Since new home sales are reported when a contract is signed, April new home sales should be robust. Existing home sales are recorded at closing, so they should see a lift from the tax credit through June.

To the extent that some prospective home buyers have moved their purchases forward to qualify for the credit, new home sales after April and existing home sales after July are likely to experience some leveling off. At that point, the reviving economy, low mortgage rates, affordable house prices and new job growth will take over as the forces driving home buying activity.

In the meantime, adverse credit conditions will continue to serve as a speed bump in the housing recovery as buyers grapple with tighter credit standards and builders attempt to overcome major impediments to obtaining and renewing acquisition, development and construction (AD&C) loans.

Builders also continue to face intense price pressure and competition from foreclosure and short sales. Appraisers are using distressed sales in  their valuations of newly built properties without properly adjusting for the run-down conditions of many previously owned homes that have been languishing on the market. Pressure from banking regulators can further encourage “low ball” appraisals. For builders, unfortunately, poor appraisals often can result in  lost sales.
 

The decline was technical in nature, resulting from a decline in the Midwest following a considerable jump in residential construction activity in that region in February. Even so, single-family starts in March were up 47% on a year-over-year basis, and taking  the Midwest out of the picture, they were up 6.9% for the month.

Single-family building permits in March jumped 5.6% from February and 51% from a year earlier, and were at their highest level since August 2008. Builders are obtaining permits at this point to rebuild their inventories — which at 228,000 in March were at their lowest level  since early 1971 — and because they are adopting a  positive view of future demand.

Multifamily starts, on the other hand, appear to be bouncing along at the bottom. March’s 95,000 starts were just above the first-quarter average of 92,000 starts. Multifamily permits, although from a decidedly  low level, have shown an upward bent. This may be an early indication that some financing is becoming available for a limited, but growing number of projects. [return to top]
 

As of February, the S&P/Case-Shiller seasonally adjusted 10-city price index rose 1.1%, the ninth monthly increase in a row. However, the 20-city index fell 1.1%, its first decline in nine months. Nonetheless, both the 10-city and 20-city indexes were still up from a year earlier (by 1.4% and 0.6%, respectively).

The LoanPerformance Home Price Index produced by First American CoreLogic showed a similar result, with house prices up 0.3% in February from a year earlier. Excluding distressed sales, the index was up 0.6%, the first year-over-year increase for the index since December 2006.

March median new home prices rose on a year-over-year basis for the third month in a row, up 4.3% ($214,000 versus $205,100). Despite foreclosed home sales and short sales, median existing home prices edged up 0.6% in March from a year earlier ($170,700 versus $169,700), the first year-over-year rise since July 2006. [return to top]
 

However, building material prices, which fell during much of the housing recession, have experienced upward pressure of late. Prices for single-family construction in March were up 2.7% from a year earlier  and multifamily prices were up 3.0%. These prices have risen five months in a row. With much of the world, along with the United States, in a recovery mode, many of these prices are likely to continue to rise.

Nonetheless, overall prices in March were still below their peak levels of September 2008, with single-family materials construction prices down 2.0% and multifamily prices down 3.8%. Also, some of the sharp price increases recently for materials such as lumber reflect  temporary supply shortfalls that are likely to be reversed quickly in the next few months. [return to top]
 

Following its recent meeting, the Federal Open Market Committee (FOMC) issued a press release indicating that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” keeping its target federal funds rate in the 0.0% to 0.25% range.

Level mortgage rates and the approaching home buyer credit deadline have increased demand for mortgages. April purchase applications returned to their October 2009 high, when the first-time home buyer tax credit was in effect. Demand for government mortgages (FHA and VA) have been on the rise since the beginning of this year. [return to top]
 

Mark Zandi, of Moody’s Analytics, and Chris Varvares, of Macroeconomic Advisers, will join NAHB Chief Economist David Crowe for a macro-level look at the state of the nation’s economy and its impact on housing.

To register, visit www.nahb.org/cfc. [return to top]