New-home sales no longer on the rise

Maybe it's simply a coincidence that new-home sales took their first hit in six months just as the first-time homebuyer tax credit nears its end.

Not since March have new-home sales fallen, but now the Department of Commerce is reporting that September's seasonally adjusted rate of 402,000 was down 3.6% from August's revised rate of 417,000. September's rate also is 7.8% below the 436,000 in the same month a year ago.

Keep in mind that this report follows the number of contracts to buy rather than actual completed home sales, which means that we're talking about people who do not have time on their hands if they're hoping for an extra $8,000 from the government.

Applicants for the credit have until Nov. 30 to close on a deal, but in this day and age of tightened credit and new appraisal rules, buyers signing a contract as late as mid-September for a new home would be cutting it close to that deadline.

So maybe it's not a coincidence. From MSNBC.com:

The report "demonstrates the power of the first-time homebuyers tax credit," said Bernard Markstein, senior economist with the National Association of Home Builders, which has been lobbying Congress to extend and expand the tax incentive. "We just haven't gotten the economy back to the point where we can step back and say the housing market doesn't need any more support."

And support it the government has. Goldman Sachs recently estimated that government programs to prop up the market have artificially inflated home prices by as much as 5%, according to The Wall Street Journal.

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The report on new-home sales certainly reflects that trend, with the median price paid for a new home in September rising to $204,800 from $199,900 in August, but down from $232,100 a year ago. Similarly, the average September price of $282,600 was up from $256,000 a month earlier, and $292,600 from September 2008.

But prices still aren't high enough to turn big enough profits for builders, according to another Wall Street Journal piece that urges potential buyers who still are looking for that brand-new McMansion in the suburbs to act fast.

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They're not going to go away entirely, but builders are pulling back as demand slows, while also pondering a new tack to suit the more modest cultural trends of the time.

And supply really has gone down. In January, new homes were at a 12.4-month supply, and they're now down to a supply of 7.5 months, according to the Commerce Department. The Journal writes that levels this low haven't been seen since 1992, so maybe it wouldn't be such a bad idea to boost that McMansion hunt into high gear.