New-home sales increased 11.1 percent in March, according to a closely-watched Commerce Department report [PDF] that came out today. It's a bit of good news, especially after February's dreadful showing--the numbers for that month were the lowest since 1963--but it's also not cause for wild celebration. Here's a bit of context to help you understand the report:
The good: March's increase in new-home sales follows three straight months of declines. They showed healthy gains in the Northeast (66 percent), in the West (almost 26 percent), and in the Midwest (almost 13 percent). The only region where sales fell was the South with a mild 0.6 percent dip. Meanwhile, estimates for January and February were also revised upward.
The bad: Sales remain 21.9 percent lower than a year ago, and they're still well below the rate that economists consider a healthy bellwether. According to the Associated Press, "economists say it could take years before sales return to a healthy pace." The AP notes that construction will probably be depressed until foreclosures are down, but there are 1.2 million foreclosures expected this year, so that will take a while. The Wall Street Journal quotes President Obama, who said last week that the housing sector is "probably the biggest drag on the economy right now."
Probably the best summation comes from economist Michael Gapen, as quoted at Bloomberg: "A housing recovery is going to be slow ... I see light at the end of the tunnel, but I see a lot more tunnel."