23 Dec 08 New Homes: Sales and Inventory Decline, Average Sales Price Up

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In November, reports show that sales of new homes fell to levels not seen in nearly two decades and that the median price of homes decreased 11.5%, year-over-year (YOY), to $220,400.

There is a tad bit of good news though, you just have to look for it! According to the U.S. Department of Housing and Urban Development, that November median home price of $220,400 actually represents a month-over-month increase of $4,400! In addition, the average sales price of new homes in October was $272,300, which rose to $287,500 in November. The average sales price of new homes has been slowly increasing each month since the 2008 low of $263,900 in August.

Is the data Accurate?

The decrease in new home sales is news that many expected as economic hardships continue and consumer confidence in anything remains low. It’s also news that will likely change, the article U.S. Data Shows Sales of New Homes at Lowest Levels in 17 Years on www.MarketWatch.com, mentions

The government cautions that housing data are subject to large sampling and other statistical errors. Large revisions are common, and the standard error of 11% is so high, the government cannot be sure in most months whether sales rose or fell.

It’s actually rare to see a government report that doesn’t change from one month to the next…I read the monthly HUD new residential sales press releases and can’t remember ever reading a release that didn’t contain the word “revised” when talking about the previous month’s numbers.

What about inventory levels?

New home inventory levels, currently at 374,000, are slowly decreasing and have been all year; they are at the lowest levels since February 2004 (373,000). If supply continues to decrease, a spike in new home sales could quickly deplete new home inventory and push builders towards building more homes, resulting in fewer job losses. The bad news… in February 2004, that number represented a 3.8-month supply; today, at the current new home sales rate, the inventory level represents a shocking 11.5 month supply…I’ve skimmed through over 13 years of HUD press releases and can’t find one that reports a larger supply, can you?

Should I buy a new home?

That depends on you and your market, ask a professional…

If you’re looking for a new home, all this bad news is probably enough to keep you on the sideline waiting for some indication that “now is the best time to buy”. In reality, right now might just be that time, interest rates are incredibly low, in the high 4s, and home prices are more affordable than they’ve been in several years. I’m not saying home prices have hit bottom, or that the government won’t soon jump in and offer new home incentives of their own, I’m simply saying that you never know what’s going to happen and that if you can afford a new home, and need one, conditions in your market might never be better. Ask a real estate agent about your local market…they may tell you to sit tight and see what happens, or they may feel that interest rates and local market conditions are in your favor. Buying a new home is a major decision and you should seek the advice of a professional before you do anything…it could be the best time for you, or it could be the worst time…it all depends on your situation and your local market.

Interest rates are nothing you say?

Did you know that your estimated monthly payment on a $200,000 30-year fixed rate loan at 7% is $1330.60, and that at 5% it’s $1073.64. That small 2% difference in your interest rate represents a savings of over $92,000!

Tags: home builder news, housing news, inventory of new homes, new home news, new home sale in Nov. 2008, new homes, real estate news

28 Oct 08 New Home Sales Q4 Economic Outlook

With consumer spending steadily decreasing from mid-2007, sparked from the housing meltdown, experts have estimated that consumption will likely fall more than 4 percent annualized this quarter. To add fuel to the fire, the deteriorating credit market has negatively influenced all three major determinants of consumption.

New homes sales will likely remain suppressed well into 2009. Not good news considering the housing sector is already suffering from the rising unemployment, tightened credit conditions, declining household wealth, and in some markets, the affects of recent severe weather.

What does this mean for you?

This will directly affect your access to credit, not to mention your credit rates; and will indirectly affect both real disposable personal income and household wealth. In regards to the economy as a whole, this means that for the remainder of the year, and leading into 2009, we can anticipate diminishing consumer confidence and business confidence, which will cause further payroll cutbacks and additional suppression of real disposable personal income.

So here we are. We’ve witnessed declines in consumer spending, beginning in 2007, employment gains gradually diminish, soaring energy costs, oh… and let’s not forget the significant declines in household wealth and the continued declines in real estate values.

The experts have stated that even with the recent decline in energy prices, it’s not nearly enough to overcome our waning consumption concerns; mainly caused by the large decline in personal wealth.

There is some good news in all of this if you are a homebuyer, or at least a buyer who can meet the criteria to qualify for a loan, and that is new home costs have declined significantly. The fact is that many home builders are reducing pricing, increasing incentives, adding better upgrades, all in an attempt to attract buyers and shrink their inventories. I know what you’re thinking… and yes, there is a good chance that if you buy now your new home may decline in value while the market works its way towards recovery. But if you’re thinking long-term, the declines will be insignificant compared to your gain over the next five to six-plus years.

Tags: 2009 economic outlook, consumer confidence, home builder news, Home Builders, housing meltdown, housing sector, housing sector news, new home incentives, new home sales, real disposable personal income