Sales of new homes hit 2-year high

The shrinking inventory of used homes may be increasing demand for new construction. But the sales rate still remains barely half of normal.

By Teresa at MSN Real Estate Jun 25, 2012 9:04AM

Sales of new single-family homes rose 7.6% in May, to the highest rate in two years, but remained far below the number of new-home sales that constitute a normal market.

 

At the May rate, builders could expect to sell 369,000 single-family homes this year, compared with the 700,000 that would indicate a normal market, according to data from the Commerce Department.

 

"The relatively strong increase in new-home sales this May is an indication that more potential homebuyers are being drawn to the market by today's excellent mortgage rates as well as firming conditions in some local economies," Barry Rutenberg, chairman of the NAHB and a homebuilder from Gainesville, Fla., said in a news release.

 

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One factor that may be spurring the sale of new homes is the shrinking inventory of used homes for sale in many cities. The shortage is especially acute in lower price ranges.

The median price of a new home in May was $234,500, which was 5.6% higher than at the same time last year. Builders also sought more permits to build new homes in May than they had sought in 3 1/2 years. The current inventory of new homes for sale would sell in 4.7 months at the current sales rate, and a six-month supply is normally considered healthy.

Regionally, the picture varied considerably. Sales rose 36.7% in the Northeast and 12.7% in the South, but fell 10.6% in the Midwest and 3.5% in the West.

Despite the improvement in the statistics, the construction industry still has a long way to go,

Morgan Brennan of Forbes wrote.

 

"I’m not buying into the proposition that the nation’s construction industry will recover in 2013," Anirban Basu, chief economist of Associated Builders and Contractors, said in a news release last week. "What we have right now is an utter lack of confidence in the economy, and confidence represents a centrally important requirement for construction spending growth."

Tags: new construction
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124Comments
Michelle in Phoenix
Jun 26, 2012 5:10AM
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Cookie cutter homes are so ugly! Why can't builders let their greed go and get creative with building homes? Why does it have to look like a factory of widgets they all look aike, when you pull ino a subdivision? Why does the general public continue to purchase the garbge these builders are building and selling for hundreds of thousands of dollars. These homes are not quality, they aren't aesthetically pleasing to the eye, they aren't "Home".
Mojo1123
Jun 26, 2012 4:54AM
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This all royally sucks.  To be honest, continuing to build new houses is the last thing that this country needs when there are still so many good "used" houses on the market. Let's actually NEED all of the new developments before deciding to just build something for profit sake.  In the area I live in, it's amazing and sad to see how much the landscape has changed in the past 10 years.  Where once was wonderful woods and farmland, now sit half completed "new" neighborhoods and empty store fronts.  And of course, the banks in our area aren't/can't give loans because of all the new government regulations, thereby snuffing out any of what's left of a housing market.  Sad, sad, sad...
Diese1
Jun 25, 2012 6:36PM
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wtf? one day the housing market is at the lowest its ever been and the next day its the highest its ever been. its all bullsheet folks.
troutgravy
Jun 25, 2012 5:15PM
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Can't wait to see the 'adjusted' numbers coming later.  No effect on today's market should clue in these liars that we're are seasoned to their BS.
PLUMB FEDUP
Jun 25, 2012 3:13PM
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I live in rural Texas, just south of Abilene.  Houses have been selling fairly well here, you might call them fixer uppers.  The average price range is $15-$50k (1940 -1960 vintage) some are in pretty desent shape. I asked some of the recent buyer what possessed them to move here, cheap housing, cheap repair cost and I paid ca**** mine.  Screw the bank and the mortgage, if things get rough, I will still have a roof and can pick up enough odds and ends to pay taxes & utilities.

 

If you are looking for government handouts, this is the place to be and drugs are in an abundance supply of what ever you want.  The Local PD will direct you to the nearest dealer.  If you actually want to work , there are plenty of jobs if you are clean.

 

Move to our town, Life at a different Pace.  Tell them EDC sent you.

 

 

Hockeydude777
Jun 25, 2012 2:11PM
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Who are the idiots that did this survey and where did they get there data?? Have they been to Vegas, Florida, Colorado, Georgia, North Carolina, etc, etc?? Or did they just go to Texas!!! Wow .... things actually went up. That's like saying a team is on a winning streak when they won one game ... even though they had just lost 20 in a row!!
MJJerome
Jun 25, 2012 1:55PM
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You have got to be kidding. New home sales are less then half of what they need to be and you are saying that this is a good sign? New home sales are so bad that they can only go up. Whoever wrote this should go find a job telling stories at a mountain vacation retreat. If you would be honest maybe we could find a way out of this but honesty is the last policy.
Lennie827
Jun 25, 2012 1:22PM
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Most buyers used to be second time purchers of NEW HOMES. I Purchased a condo back in 2004 at a good price. Before the bubble burst with Sub-Primes Etc, my condo value rose some 80k within 3 years. Now my condo is valued at the price I paid for it. I live close to New York City where I thought values would hold firm-but they didn't
Someone (azpackrat123)
Jun 25, 2012 1:19PM
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Investors here in Tucson and Phoenix are now buying up new homes to use as rentals.  Still have friends working at new home sites and all of them have said investors are coming in now and buying.  Some of them 2 to 3 at a time, sound familiar.....?  We just never learn our lesson apparently this will turn into another bubble since most of these fudged numbers are due to investors and not real families anyway.  SO NO,  even though news agencies run a "look how good the housing market is" article every week, I'm not buying it.  The next crash is going to be more painful then anyone can imagine.  Sad....

Ken Sweitzer (khs84211)
Jun 25, 2012 1:13PM
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This is bullcrap!! Just a number estimated to fool the public on economic recovery. Still there are those who are stuck with underwater loans. Also something news in the as we get closer to election time.

Vote (C) None of the above.Remember the movie in which the great Richard Pryor played?

TetraCore
Jun 25, 2012 1:11PM
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There is no question that the banks are sitting on a lot of foreclosures.  However, they have learned how to operate.  They are releasing them very slowly in order to inflate the prices.  They have been successful at it.  For the last 6 months I have been trying to buy one of these stressed pieces of property.  The banks set an asking price, and I like the asking price I make an offer.  Putting offers in is a no risk, free proposition.  Even after your bid wins you have a certain number of days to withdraw.  So I have been putting in many many offers.  Not a single one of them has won.  The last two times I actually made an all cash offer even though I had no intention of going through with it because I don't want to buy a house all cash.  I was trying to figure out if that improves my odds. No, it didn't.  I have been outbid in every case.  There are people jumping, making offers over the asking price, and in many cases they're doing it all cash. 

The other thing that I have seen in the last 3 months is the banks' initial asking price has jumped by at least 10 percent.  I have made offers on those too, and have not won.  So it's clear the prices have moved up.  Can the banks do this forever?  I suppose so.  Because even though I have been at it for the last 6 months, I had followed the market for over a year before jumping in. All I have been told for the last 2 years is their inventory keeps dropping, but just about all realtors know the banks are sitting on a lot of foreclosures.  So the banks must have figured out how to force the prices up while slowly getting rid of their inventory.  The thing to keep in mind is the number of foreclosure notices compared to the inventory. If the number of foreclosure notices drops while sales go up, that means the inventory is dropping too and eventually will reach a normal level.

I'm just reporting the facts as I see them.  Please spare me your partisan flames.  But if you have any experience in support or opposite of what I have seen I'd like you to share it.  
cpete
Jun 25, 2012 12:57PM
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What on earth does Mit Romney's take on marriage have to do with the cost of housing pray tell?  Let's stay on topic! 
riptideharry
Jun 25, 2012 12:27PM
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Let's not forget which administration got us into this mess.  It's kind of like this.  You have a 15 year old piece of junk car.  You lend it to a friend.  The car breaks down.  Now, is it the friend's fault that the car broke down?  I don't think so. You drove it to the brink of breaking down, and your friend happened to be behind the wheel when it went kaput.  That's what "W" did for us.
Disatisfied
Jun 25, 2012 12:21PM
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The last time they said this, it was a lie and later they had to set the record straight.  I don't believe them now either.
thetruthhurts123432
Jun 25, 2012 12:19PM
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The Keywords here are new homes, coincidentally there is a shortage of homes on the market due to banks holding on to foreclosed properties. If they let them trickle out slow enough they can drive the prices up with competitive bidding. The "shadow inventory" is still there the banks just have the luxury of being able to wait compliments of our bailout money.
mhloc8r
Jun 25, 2012 12:13PM
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I work in road construction of newly developed properties and I haven't seen an increase in the amount of work being awarded. A lot of bidding, but no awards. My mortgage company told me tht they have over 4,000 foreclosed houes that they haven'tput on the market yet for fear that if they do, te other houses up for sale would bottom out. That is only one mortgage company, imagine what the rest may have 
Johnny B (muphinmuncher)
Jun 25, 2012 12:12PM
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Smells like BS where are they getting these numbers? lots of misinformation
Bob Tapo
Jun 25, 2012 12:09PM
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The Housing Market will recover, much faster than in previous slowdowns, BUT ONLY IF we continue on the path that B Obama has set us on.  Mith Romney, a MORMON thinks a true marriage is between a man and a woman and a woman!!  Those Mornons are really a bunch of Crazies.
yourbad
Jun 25, 2012 12:05PM
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Its not hard to believe that homes that in desirable areas are selling and for more than asking price.  People if you live in a neighborhood where you have a lot of foreclosures and they are not getting snatched up its because no one wants to live there.  An investment is a gamble.

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About Teresa Mears

Teresa Mears

Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.

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