A joint press release from the U.S. Census Bureau News and the U.S. Department of Housing and Urban Development stated that sales of new homes in October increased 6.2% when compared with the revised sales rate from September. In October, the sales of one-family houses were at a seasonally adjusted annual rate of 430,000; September’s revised rate was 405,000.
I’m not too impressed with the increase and The Wall Street Journal isn’t either. The expiration of a government incentive guaranteed an increase, if anything, the increase wasn’t enough.
An Increase in new home sales is great news, why wouldn’t you think so?
It’s good to hear that sales increased, but most of the increase, if not all, occurred because first-time home buyers were hurrying to meet the deadline for the $8,000 tax credit*. This means that some future sales for November, December and the first part of 2010 likely already occurred; the sales are incentive driven and the data doesn’t represent a “real” market.
Another reason people aren’t cheering the sales increase is because the data comes with a 17.6% error range, which doesn’t give it much credibility. This range means that new home sales could have decreased by as much as 11.4%, or they could have increased by as much as 23.8% – a huge swing that discredits the data (I hope 23.8% becomes the revised number).
A final reason is that the increase was entirely driven by new home sales in the South, the sales rate in the three other regions declined.
The Good News…
Although the data about a small increase in new home sales isn’t too impressive, there is good news. The supply of new homes again dropped, and now there’s a 6.7 month supply of new homes on the market – yes, it’s still too high, but inventory is decreasing. If sales keep up during the first part of 2010, inventory levels should continue to decrease and many builders may give building homes another chance. New construction means jobs and the economy won’t get better without jobs.
*The tax credit was recently extended and now ends on April 30, 2010
Source:
New Residential Sales in October 2009
See Also:
New Home Sales in October – CalculatedRiskBlog
Parsing October’s New Home Sales Data
Subscribe to our New Homes Blog!
Well it is a good news, because it only means that our economy now has been improving
Scott Nachatilo´s last blog ..How to find deals to Flip for Quick Cash
The only reason sales are great in the south is because the prices are amazing. The same kind of home in New York cost 5x as much as one in Texas.
The over supply of homes in the Atlanta market has always been the biggest problem here. We never had the hyper-appreciation like several parts of the country, but the developers and builders would throw up a house on every empty lot they could find. Glad those days are over. Now we have to deal with the foreclosures…
The figures show that we are slowly on the right way. This one of many good small things, other good thing is the jobs figures. But it going to take longer time for California, Nevada and some other states.
I agree with the statement that these stats may not reflect the real market. Incentives offered in one year that were not offered in others tend to skew the numbers. The fact that the supply of new homes dropping, though is a positive sign.
Great News! As a new home builder, we have begun to see this trend.