July 2009 Archives

New homes sales soar unexpectedly

Sales of newly constructed single family homes rose 11% over May, but median price fell 3%.

By Les Christie, CNNMoney.com staff writer

Last Updated: July 27, 2009: 10:23 AM ET

NEW YORK (CNNMoney.com) -- Sales of newly constructed single-family houses spiked 11% in June to an annualized rate of 384,000 homes.

The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000, according to Breifing.com. However, sales are still 28% below the levels of a year ago, when new homes sold in June at an annualized rate of 530,000.

Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month.

"That is really good news," said Peter Morici, an economics professor at the University of Maryland who had forecast June sales to be at the 350,000 level. "Considering what's going on in existing home sales, with all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out."

Builders have been a little more optimistic about market conditions lately and this report should further buoy their spirits. An index of builder confidence from the National Association of Home Builders rose to 17 this month after languishing in single-digit territory.

As a result, builders have stepped up their pace of construction; in June, they began building single-family housing units at an annualized rate of 470,000, a 14.4% jump over May.

The median price paid for a house sold in June 2009 was down about 3% to $206,200; the mean price was $276,900.

By the end of the month, the inventory of new homes had dropped to 281,000, an 8.8 month supply at current rates of sale. Last month, there were enough homes on the market to last 10.2 months at that rate. 

First Published: July 27, 2009: 10:17 AM ET

BUILDER CONFIDENCE RISES TWO POINTS IN JULY

WASHINGTON, July 16 - Builder confidence in the market for newly built, single-family homes notched up two points in July to its highest level since September 2008, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI rose two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future.

"Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production. Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike."

"Although today's HMI is positive news that helps confirm the market is bouncing around a bottom, the gain was entirely contained in the component gauging current sales conditions, while the component gauging sales expectations for the next six months remained virtually flat for a fourth consecutive month," noted NAHB Chief Economist David Crowe. "Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces."  For example, said Crowe, a quarter of all new-home sales are falling through due to appraisal issues that are tied to the use of distressed and foreclosed properties as comps. "This is a tremendous obstacle for a housing market that is struggling to get back on its feet, as is the lack of available credit for acquisition, development and construction financing."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Two out of three of the HMI's component indexes posted gains in July. The index gauging current sales conditions rose three points to 17, while the index gauging traffic of prospective buyers rose a single point to 14. Meanwhile, the index gauging sales expectations for the next six months remained flat at 26.

Regionally, the South posted the biggest HMI gain, with a 5-point increase to 20. The Northeast posted a three-point decline, to 16, while the Midwest and West were each unchanged, at 14 and 15, respectively.

EDITOR'S NOTE:  The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. Please email Paul Lopez at plopez@nahb.com to receive the HMI tables. More information on housing statistics is also available at: www.housingeconomics.com.