New Home Sales Category
Not all housing reports are sunny, it seems.
In its monthly New Home Sales release, the U.S. Department of Commerce showed a 13 percent drop-off in annualized new construction sales between the months of December and January.
It’s the biggest one-month drop in New Home Sales since May 2010.
In addition, the supply of new homes for sale spiked higher to 7.9 months last month. “Home supply” is defined as the amount of time it would take to sell the complete “for sale” inventory at the current pace of sales.
In December, the supply measured just 7.0 months,
Don’t fret the news, however. For buyers of new construction in Longmont , falling New Home Sales figures can be terrific. Weaker markets put pressure on the nation’s home builders to sell their respective homes more quickly. To reach that goal, builders often discount prices and/or offer free upgrades to buyers.
Some of that action may already be in effect.
Despite falling volume, the New Home Sales report showed that new homes are selling faster than in recent months. The median time required to sell a newly-built home dropped to 7.8 months in January — a figure well below January 2010’s reading of 13.9 months.
It suggests that builders are getting better at locating buyers, and moving property.
Therefore, if you’re shopping for a new construction and see one worth buying, get to it. Not only will the home likely sell soon if it’s priced right, but an increase in mortgage rates will make the home more expensive to finance.
Every 0.250% increase to rates adds $15 monthly per $100,000 borrowed.
Sales of new homes rose sharply in December, posting a 17.5 percent gain from the month prior.
According to the Department of Housing and Urban Development, New Home Sales climbed to 329,000 in December, besting November by close to 50,000 units on a seasonally-adjusted annual basis.
Last month’s reading is an 8-month high for New Home Sales, and the latest in a series of signals that housing is improving in Longmont and around the country.
Furthermore, an interesting pattern is emerging in the price points of home sales. The highest levels of relative growth are occurring within the “move-up buyer” segments. Entry-level price points are lagging the market, as a whole.
December’s New Home Sales data breaks down by price point as follows:
- Homes under $200,000 : 36% of the market (-9% from November)
- Homes between $200,000-$299,999 : 32% of the market (+7% from November)
- Homes between $300,000-$499,999 : 27% of the market (+7% from November)
Luxury homes accounted for less than 5% of the newly-built home market, suggesting that Colorado homeowners are either not “buying new” as frequently, or are choosing to renovate their existing properties instead.
The 2010 housing market finished on a tear, and that momentum is carrying forward into 2011. Expect the spring season to show strongly, putting pressure on home prices to rise.
Coupled with rising mortgage rates, the long-term cost of homeownership is unlikely to be as low as it is today.
Like most housing data in November, the most recent New Home Sales report showed sales volume increasing last month, and home supplies falling.
According to the U.S. Department of Commerce, sales of new, single-family homes increased to 290,000 in November on an annual basis, a figure equal to the New Home Sales 6-month rolling average, and a 6 percent improvement from October.
At the current pace of sales, the national supply of new homes for sale will be exhausted in 8.2 months — a strong 0.6-month improvement from October.
This data is consistent with the most recent Existing Home Sales report. It showed sales volume rising 6 percent, too, and a similarly-strong inventory drop.
For the housing market in Broomfield , it’s another step in the right direction. Since May’s post-tax credit plunge, home prices have stabilized and a foundation for growth has been built. Home builder confidence data highlights this point.
Also interesting in the November New Home Sales report is the volume breakdown by price point. Less expensive homes powered the market:
- Homes under $200,000 : 47 percent of all sales
- Homes between $200,000-$299,999 : 29 percent of all sales
- Homes between $300,000-$399,999 : 14 percent of all sales
Luxury homes accounted for less than 2 percent of sales last month suggesting that builders count first-time and move-up buyers as their core market.
As 2010 comes to a close, housing looks poised for a rebound. Sales in all categories are improving, relative to 6 months ago, and the economy is improving. In conjunction with rising mortgage rates, the best time to buy a new home may be now.
After posting a strong September, the number of newly-built homes sold nationwide slipped in October.
Total units sold on an annual basis dropped by 25,000 from September; supplies of new homes climbed 0.7 months. Home supply is back to its rolling, 6-month average of 8.6 months.
Like everything else in real estate, however, the October’s New Home Sales results varied by location.
For example, except for the South, each U.S. region posted a loss. In the South, there was a 3 percent gain. This is statistically significant because more new homes are sold in the South than in all other U.S. regions combined.
In October, the South accounted for 58 percent of all homes sold.
The dip in New Home Sales did not surprise Wall Street. New Home Sales is closely correlated to Housing Starts, and Housing Starts fell in July and August. Furthermore, it seems home builders expected the dip and are brushing it off.
In a poll taken 2 weeks ago, builders reported higher confidence in housing, and their respective prospects for the future. Home builder confidence is at its highest point since June.
For buyers in Longmont , the effects of New Home Sales data are unknown. In a normal environment, falling sales volume and rising home supplies would help shift negotiation leverage away from the seller and toward the buyer, resulting in lower sales prices.
However, in this market, the “sellers” (i.e. home builders) are more confident about housing, and that offsets a buyer’s statistical edge.
With home prices stagnant and mortgage rates rising, therefore, the best “deals” may come between now and the New Year.
In the same week that the National Association of REALTORS reported home resales up 10 percent in September, the U.S. Census Bureau reported similarly strong results for the new construction market.
After improving 1 percent in August, New Home Sales popped another 7 percent in September.
It’s no wonder homebuilder confidence is at a 5-month high.
- Sales volume is higher in 4 of the last 5 months
- New home supply is at a 5-month low
- Buyer foot traffic is on the rise
For home buyers in Broomfield , September’s New Home Sales data may foreshadow a shift in builder sales strategies and it’s something worth watching.
Recall that in April, the month that the federal homebuyer tax credit contract deadline passed for non-military citizens, sales of new homes was strong as buyers rushed to meet the April 30 cut-off date.
When the month ended, there were 216,000 new homes for sale — an inventory that would have taken 6 months to sell off in full, given April’s sales pace.
In May, however, the month after the tax credit deadline, buyers vanished. As a consequence, total units sold dropped 31 percent to their lowest level in recorded history. Coincidentally, at the end of May, there were still 216,000 units for sale.
By contrast, though, at May’s sale pace, the inventory would have needed nine months to sell out.
This is why builders are optimistic. The market for new construction is improving so buyers may have a harder time trying to negotiate for items like free upgrades or sales price reductions. So long as New Home Sales improve, home buyers may find themselves paying more money for less house.
Therefore, if you’re in the market for a newly-built home , you may want to move up your time frame. The longer you wait, the more it may cost you.
Existing Home Sales rebounded last month after a lackluster July. New Home Sales data, by contrast, did not.
After an upward revision to July’s data, New Home Sales remained unchanged at 288,000 units in August. It marks the second-lowest number of units sold in a month since 1963, the year government started its record-keeping.
At the current pace of sales, the newly-built home inventory would be depleted in 8.6 months.
The August New Home Sales was weaker-than-expected, but both Wall Street investors and Main Street economists are shrugging it off. The numbers were foreshadowed by weakening housing figures from earlier this summer.
- Building Permits dropped between March and June
- Housing Starts dropped between April and July
- Homebuilder confidence continues to sag
Together, these three data points suggest that the market for new homes will be soft through at least this month.
With New Home Sales fading and colder months ahead, it may be an opportune time for home buyers in Longmont to look at new construction. Builders are eager to move inventory and the cost of materials remains low.
Buying “new” may never be cheaper — especially with mortgage rates as low as they are. The 0.750 percent drop in rates since January has shaved $188 off of a $200,000 mortgage’s monthly cost. That’s $2,250 per year in savings.
As home supplies dwindle and mortgage rates rise, finding “great deals” in new construction will undoubtedly get tougher. Take advantage of today’s market conditions, combined with builder pessimism. It may be the right combination at the right time to get that new home for cheap.