New-home sales soared across the country in April, the government said Thursday, but the surprising increase came only after builders slashed prices to shrink swollen inventories.
What's more, the 16.2% jump from March -- the biggest in 14 years -- was driven largely by increases in the South. In the West, which includes California, sales were up 8.5%.
Demand remains weak in Southern California. Inventories have continued to grow, and experts say builders in the region have not been as aggressive in cutting prices as they have elsewhere in the nation.
The government report "does not jibe with the reality" in Southern California, said Peter Dennehy of Sullivan Group Real Estate Advisors, a San Diego-based consultant to builders. "Sales are what they are and that is they are lower than what they were last year."
DataQuick Information Systems of La Jolla reported a 19.6% decline in the region's new-home sales last month from March. And sales were down 45% in the first quarter compared with the year-earlier period, according to Hanley Wood Market Intelligence, a Costa Mesa-based building industry research firm.
Builders nationwide have been hurt by weakening demand. And the ranks of prospective buyers for entry-level homes have been thinned as lenders have toughened their standards amid rising defaults and foreclosures.
That's why many analysts were surprised Thursday when the Commerce Department said sales had risen sharply. But the agency also said prices of new homes fell by 11%, the biggest monthly decline on record.
"Aggressive sales techniques being employed by builders are now showing some success," David Seiders, chief economist at the National Assn. of Home Builders, said in a statement.
In Southern California, builders are more likely to offer incentives, rather than price cuts, to drive sales. These include paying closing costs, chipping in for the landscaping and subsidizing mortgage payments.
This strategy has helped builders avoid discounting their products, buoying their prices. In April, the median new-home price rose 3.2% year over year to $454,000, DataQuick said.
"Median asking prices are still rising even though sales have declined, and that disconnect hasn't hit our numbers yet," said Patrick Duffy, a Hanley Wood managing director. "Incentives are still masking price declines."
Hanley Wood reported a 4.8% rise in the median new-home price in the first quarter.
