Monday, July 27, 2009

New home sales up 11%


Wow, that sounds like encouraging news for the economy, doesn't it? Up 11% from May to June. The media is trumpeting this horn but is the tune really all it's cracked up to be?

Of course it's not. This June was better than May but why compare it to May? There's always a difference from month to month. Could be the number of days could be that there are always more sales in June due to the summer bounce. When comparing sales numbers, year over year is a more accurate measure of the health of the market. So how did those new home sales stack up against last June? Down 21%! There's the real headline, "New home sales fall 21%".

Oh and I might have forgotten the best part of this sales spin. There's little mention of the fact that the median price of those new homes fell a whopping 13% in ONE MONTH! May median was $219k and the June median fell to $206k. It's little surprise when you factor in the buyer incentives, especially here in the west. Buy a new home in Cali and you can get $18k in credits. With FHA offering 3.5% DPs and the government giving up to $18k in credits it certainly makes new homes more attractive. You also don't have to fight the mob trying to get the REO's.

Home builders are still having a hard time competing with the prices of foreclosures and REO's. It's simply too expensive to build a new home and get the price in line with the REO's. Part of the reason is the McMansion syndrome. Now days everyone thinks they need a 3000 s/f home. Well it's costs a lot to build a home that size. If the builders want to compete they will need to start building to a price point that is competitive. Many of the builders are saddled with expensive parcels of land. Unless they write the value down, or default on them they might never be able to put an affordable house on that land. I'm sure over the next few years builders will start to downsize the homes they are building. It happened in the early 90's and I see it happening again. KB in Perris started building smaller homes. Putle dropped the price at Stellan ridge $100k....or did they. Well actually what they did was add 2 new smaller models. The price of the other homes didn't really change.

I'de really like to see new homes selling again. That would really go a long way to pull us out of this economic quagmire. But the unfortunate truth is that new home sales are the lowest they've been since the early 80's. It's nothing price can't fix though!

7 comments:

Karen's Corner said...

Where on Earth are NEW houses in the Inland Empire? I thought the builders gave up out here quite awhile ago. RC Hobbs built just a few houses in Wildomar and gave up. The new tract at Summerly in Lake Elsinore is a total bust.

Roger Roberts said...

I am about to pay $236,000 for a 1401 sg ft house at Silver Springs in Mentone. Is this a good deal? Opinions......

golfer_X said...

Three's not many houses being built in the IE. There's currently 4 tracts still building in Riverside that I know of. I know of a lot more though that have packed it in. Riverwalk vista is a perfect example. The built the streets, the community clubhouse a few models and even the first phase of homes. It's now totally shuttered. There must be 30 or 40 homes that are boarded up.


236K for 1400 s/f seem really high, but then again I am not familiar with Mentone. The median price in Mentone is $183K. The average price per square foot in Mentone is $118 s/f. You are paying $168 s/f. So what is the premium for? Large lot, view, bitchin' backyard?? That just seems like a ton of money for a house that small.

Roger Roberts said...

Thanks for the input X...........

David said...

I think it is a real good sign that the home sales are up. However, it is I think it is too optimistic to say that the crisis is over now because the uptick you have seen in May, June is because of the fact that Americans buy houses mostly in Summer. So, America has always seen uptick in these months. I would say that we should wait and watch after 2-3 months.

I think housing market has still volatile because America is loosing on Jobs and interest rates are up.

Read More: http://www.housingnewslive.com/is-the-housing-market-recovering.php

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