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Spike in New Home Sales Viewed as Very Encouraging
Sales of new single-family homes jumped more than 10% in June to an annualized rate of about 385k. The numbers came in higher than had been projected in May but still more than 20% lower than in June 2008 when homes were selling at an annualized rate of nearly 490k. In 2005, at the height of the real estate boom, the number in June was 1,375k.
Economists are taking the reports as very good news. With the falling prices of existing homes due to rampant foreclosure listings, many see the rising sales of new homes as an indicator that the economy is starting to turn around. The report should also serve to further boost builder confidence, which was already on the rise. In June, they were building new single-family homes at an annualized rate of 471k, an almost 15% increase over May.
The median sales price for homes dropped in June to just over $200k. Inventory decreased to 280k, or an 8.7 month supply, compared to a 10.1 month supply in May. Normal inventory is around 300k. The median time for homes on the market is at a record high 11.7 months. Part of the reason for this is that many people have responded to the struggling economy by moving to smaller homes closer to work. As a result there is a huge excess inventory of high dollar homes in posh suburbs.
The inventory is also located in a few markets: California, Arizona, Las Vegas, and Southern Florida. The best news is that construction of new homes seems on the verge of providing a boost to the economy again. The sector has been a drag on the overall Gross Domestic Product throughout the recession, but now appears to be providing a boost.
The bad news for buyers is that with the inventory of new homes stabilizing, it will become more difficult to negotiate bonuses such as luxury appliances and swimming pools. Buyers just entering the market may have already missed a wonderful time for getting a deal on a new home.
Marin Real Estate Blog
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