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Housing Market Scuffles, Despite New-Home Sales Gain

Thursday, July 29, 2010

New-home sales rose 23.6% in June after hitting rock bottom in May, but remained 16.7% below the level recorded in June 2009, the Commerce Department reported last week.

Sales of new single-family homes in June edged up to a seasonally adjusted annual rate of 330,000, according to estimates from the Commerce Department’s Census Bureau. Sales in May bottomed out at an annual rate of 267,000, while new homes sold at an annual rate of 396,000 in June 2009. The rate of sales in May was the lowest since the federal government began reporting new-home sales data in 1963.

Regionally, new home sales in June rose 46.4% in the Northeast compared to May, while sales rose 20.5% in the Midwest and 33.1% in the South. Sales fell by 6.6% in the West. Compared to June 2009, sales were higher only in the Northeast, with a gain of 17.1%. Sales declined 20.3% in the Midwest, 6.1% in the South, and 45.7% in the West.

Sales were expected to retreat when a federal tax credit of up to $8,000 for buyers expired at the end of April.

For good news, housing-industry watchers could point to a decline in the number of unsold new homes, which dropped 1.4% to 210,000, the lowest level since September 1968. That represents a 7.6-month inventory at the June sales rate, down from 9.6 months in May. The median new-home sales price, meanwhile, edged down 0.6%, to $213,400.

Existing-Home Sales: Mixed Signals

The existing-home market is showing more life than the new-home segment, even though existing-home sales dipped 5.1% in June from May to a seasonally adjusted annual rate of 5.37 million units. But existing-home sales were 9.8% higher than the pace of June 2009, and remain at “relatively elevated levels,” said the National Association of Realtors (NAR). In June 2009, existing homes sold at an annual rate of 4.89 million units.

But Realtors association chief economist Lawrence Yun said sales figures are likely to tail off in the near future, following the expiration of the federal tax-credit program. “Only when jobs are created at a sufficient pace will home sales return to sustainable health levels,” he said.

The median existing-home price for all housing types was $183,000 in June, up 1% from a year earlier, NAR reported.

Regionally, existing-home sales in June rose 7.9% in the Northeast compared to May, and were up 17.1% from June of 2009. Sales in the Midwest declined 7.5% from May, but were 11.8% higher than June 2009. Sales in the South fell 6.5% from May, but were 11% higher than June 2009. Sales in the West were down 9.3% compared to May, but edged up 0.9% from June 2010.