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
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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.
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1.People will always need a place to live. This is a fact of life that will never cease to be. Everybody needs a place to call home. If you have a place that you can rent out to others then you can help to fulfill this important need. Also, you can sell homes or properties as well to those who can afford them. Having properties to rent and for sale is one of the surest ways to create economic stability for your future.
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4.The investments you make in properties can be paid for by other people. When people take out loans and/or pay rent for your properties then they will be paying for the investment you made on those properties. This is an excellent way to make money while having someone else pay off your investments. What this means is that you will be saving more money for yourself.
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There are many good reasons to invest in real estate. It’s very important that you understand what you’re getting yourself into before you do and you should know the legal aspects of owning property. Investing in real estate is one of the best decisions that anybody can make and the benefits from doing so should be evident for many years to come.
]]>The lack of sales means there will be less real estate agents in the next twelve months. A real estate agent that depends on real estate sales for primary income may not survive the next twelve months. Another trend is buyer's behavior is changing. Buyers are decreasing their use of leverage. Buyers used to buy a larger house than needed because the more a buyer levered up the higher the return. Now buyers are searching for affordable houses and seeking houses with prices under half a million dollars. Therefore, houses with prices over half a million dollars are either not being sold or being reduced in price.
Buyers are also looking at the final cash flow of a house. Buyers used to look only at the price of the house and assume as long as they could make mortgage payments then they could afford the house. That has all changed at local governments try to raise revenue through property tax increases. The mortgage payment may only be half of the monthly cost of a house. Real estate taxes, insurance cost, and regular maintenance may require as much or more cash flow than the mortgage payment. Interest rates a slowly going higher.
Six months ago a thirty year fixed mortgage could be found for 4.75%. Now a thirty year fixed mortgage is about half a percent higher. Interest rates are slowly grinding higher. As long as the Us government continues to deficit spend, interest rates will be trending higher or at least not going any lower. Available credit has also decreased. Lack of credit is pushing some sub-prime borrowers out of the market which decreases demand. Lack of credit is forcing even prime borrowers to increase down payments. The increased down payments further reduce the amount of leverage in the market. As leverage decreases in the market prices compress.
There are a few bright spots in the real estate market. Underlying demand is still there for housing. People need a place to live. Properties for single families under the half a million price will continue to show demand. Investment properties, expensive properties and second home properties will continue to show weakness.
Overall, real estate trends all point to lower prices. Interest rates, insurance cost, increase property prices, and reduction in available credit are all having negative effects on real estate prices. Once credit institutions start to increase the amount of available credit in the market, prices for real estate will start to go higher again. Until that happens, prices are still trending lower.
]]>WASHINGTON -- After a staggering 74 percent decline from the peak in July 2005, new U.S. home sales appear to be bottoming out.
The pace of home sales, which hit a record-low in January, jumped in February and was flat in March, the Commerce Department said Friday. At the same time, the inventory of new homes for sale dropped a badly needed 5 percent from February levels.
"We believe that the bottom is at hand and that sales will begin turning in the second half of this year," wrote IHS Global Insight economist Patrick Newport.
New home sales fell just 0.6 percent in March to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000. February's results were adjusted upward by more than 6 percent.
The report shows the slide in demand for new homes is ending after more than 40 months of decline, wrote David Resler, chief economist with Nomura Securities.
That's not yet the case for prices.
The median sales price fell to $201,400, a 12 percent drop from a year earlier. Prices are likely to remain weak for months as builders clear out unsold homes.
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