Census Bureau

New Home Sales Remain Elevated Into Q4 2012

New Home Sales Sales of newly-built homes took a small step lower in October, but remain strong.

According to the Commerce Department, New Home Sales slipped 1,000 units last month, falling to 368,000 units on a seasonally-adjusted, annualized basis.

The final reading fell short of Wall Street expectations, and the government revised downward its initial findings from August and September by 2,000 units and 20,000 units, respectively.

A “new” home is a home that is considered new construction.

Furthermore, the number of new homes for sale nationwide ticked higher to 147,000 — the highest reading in 9 months.

However, in taking a broader look at October’s New Home Sales report, we see obvious strengths. For example, although home sales slipped last month, it remains the third-highest tally since the April 2010 expiration of the federal home buyer tax credit.

The highest reading? Last month’s 369,000.

In addition, the national new home inventory has dropped, off 8% from last year. Fewer homes for sales has been a driving force behind rising home prices. As compared to one year ago, the median new home price is up nearly six percent. More demand for buyers is a factor, too.

At the current sales pace, the complete U.S. inventory of new homes for sale would “sell out” in 4.8 months. This is a noteworthy data point because, as analysts point out, a 6.0-month supply of homes marks a market in balance.

Today’s new homes market, therefore, is a seller’s market; one in which home builders may be gaining pricing power and negotiation leverage over buyers. It’s one reason why home builder confidence has climbed to a 5-year high.

For buyers of new construction, then, in Minneapolis and nationwide, 2013 is a critical year. Home prices may rise and mortgage rates may, too. And, along the way, it may get tougher to get a “great deal” on new construction.

If you’re planning to buy, therefore, consider moving up your time frame. After October’s small step backward, the time to buy a newly-built home may be now.

More Bullish Data : Housing Starts Climb 3.6%

According to a joint release from the U.S. Census Bureau and the Department of Housing and Urban Development, Housing Starts rose 3.6% in October 2012, climbing to a seasonally-adjusted, annualized rate of 894,000 units.

A “housing start” is a new home on which construction has started and the report gives buyers and sellers across Minnesota yet one more reason to be optimistic for the 2013 housing market.

Regionally, Housing Starts varied.

The West and Midwest Regions posted gains between September and October 2012; and, the South and Northeast Regions posted declines. The latter was affected by the effects of Hurricane Sandy.

West Region : +17.2% from the month prior
Midwest Region : +8.9% from the month prior
South Region : -2.5% from the month prior
Northeast Region : -6.5% from the month prior

Single-family housing starts — starts for homes not considered multi-unit properties or to be apartment buildings — was mostly unchanged, slipping 1,000 units on a seasonally-adjusted annualized basis.

The Housing Starts data is the third housing-related release this week that hints at a strong start for the 2013 housing market.

Early in the week, the National Association of Homebuilders released its Housing Market Index (HMI), a measure of home builder confidence in the new construction market. The HMI posted 46 — the highest reading since 2006. With mortgage rates low and buyer traffic high, builders are expecting a rash of sales between now and the New Year, and an elevated number of closing over the next six months, in general.

The HMI is scored on a scale of 1-100. One year ago, it read 19.

Then, the National Association of REALTORS® showed Existing Home Sales climbing 2.1% and home supply fell to a multi-year low. At the current sales pace, the entire U.S. home inventory would be sold in just 5.4 months. Analysts believe that a home supply of less than 6.0 months favors home sellers.

In unison, these three housing market reports suggest a sustained, national housing market recovery. Home prices are expected to rise into next year’s housing market.

Single-Family Housing Starts Rise To 4-Year High

Housing Starts The housing market continues to improve.

According to the U.S. Census Bureau, on a seasonally-adjusted, annualized basis, Single-Family Housing Starts rose to 603,000 last month, an 11 percent increase from the month prior and the highest reading in more than 4 years.

A “housing start” is a home on which construction has started and home builders are breaking ground at rates not seen even during the 2010 federal home buyer tax credit period.

It’s a signal to home buyers throughout Illinois that the U.S. housing market may be permanently off its bottom.

At least, the nation’s home builders seem to think so.

Earlier this week, the National Association of Homebuilders reported home builder confidence at a 5-year high and nearly triple the levels of last September.

Buoyed by rising sales volume and the heaviest foot traffic since 2006, builders expect the next 6 months of sales to outpace the current rate. It may spell higher home prices for today’s new construction buyer.

Thankfully, mortgage rates remain low.

As compared to last year, today’s buyers have extended purchasing power. Assuming a 20 percent downpayment and a conforming home loan :

September 2011 : A $1,000 mortgage payment afforded a purchase price of $202,000
September 2012 : A $1,000 mortgage payment afforded a purchase price of $226,000

That’s an 11.9% increase in purchasing power increase over just twelve months. When combined with today’s rising rents throughout many U.S. markets, demand for new construction homes remains high and builders have taken notice. Buyers should, too.

With mortgage rates low, low downpayment programs available and home prices poised to rise, it’s an opportune time to be a home buyer. Housing has been trending better since late-2011 and will likely carry that momentum forward into 2013.

If you’ve been shopping new construction, remember that as mortgage rates and home prices rise, home affordability drops.

New Home Supply Remains Firmly In “Seller’s Market” Territory

New Home Supply chart The market for new construction homes remains strong nationwide.

According to the U.S. Census Bureau, the number of new homes sold slipped 0.3 percent in August 2012 to a seasonally-adjusted, annualized 373,000 units sold — just 1,000 units less than July 2012 and the second-highest reading since April 2010.

April 2010 was the last month of that year’s tax credit which granted home buyers up to $8,000 off of their federal tax bill.

As compared to one year ago, sales of new homes are higher by 28%.

Furthermore, during the same time frame, the median sale price of a new home moved higher by 17 percent. The rising prices, in part, are the result of a shrinking national new home inventory.

When August ended, there were just 141,000 homes for sale nationwide — a 12% drop from the year prior. This suggests that home builders have stopped building without buyers; that some lessons were learned in last decade’s homebuilding frenzy.

At today’s pace of home sales, the entire stock of new homes nationwide would sell out in 4.5 months. As a comparison point, in January 2009, the new home supply reached 12.1 months.

With home supply below 6.0 months, analysts say, it signifies a “seller’s market” and home supplies have not been north of 6.0 months since October 2011. And, based on recent homebuilder confidence surveys, supply doesn’t appear headed back over 6.0 months anytime soon.

Builders in Illinois and nationwide report that prospective buyer foot traffic is at its highest point in 6 years. Low mortgage rates and affordable housing choices have held demand for new homes strong. Rising rents contribute, too.

For today’s home buyers of new construction, then, shrinking supply amid rising demand portends higher home prices into 2013 and beyond. If you’re a buyer of new construction, therefore, think about moving up your time frame.

The best deals left in housing may be the ones you grab while the calendar still reads 2012. By January, low prices may be gone, and low rates may be, too.