A small improvement
Although beating economists’ projections by a few thousand, new home sales dropped 2.3 percent in August according to the U.S. Commerce Department. Despite weak housing numbers, sales are up 6.1 percent from August 2010, a marked improvement for a battered sector.
Taking into account that Hurricane Irene hit the Northeast and paused much real estate activity, the region saw a 13.6 percent dip in sales which brought the nation down as a whole, but without that natural disaster, it is unknown how much better this region would have performed. The Western region declined 6.3 percent while the South dropped 2.4 percent. Home sales in the Midwest, however, rose 8.2 percent in August, helping to keep the national average remain relatively stagnant.
New home inventory dropped to 162,000 units in August, a new record low, but the slowed sales led to a slight increase in the months’ supply of newly constructed homes to 6.6 months.
“The number of foreclosed homes on the market continues to pose major challenges, not just to builders who have to compete against that low-priced product, but also to buyers who need to sell an existing home before trading up to a new one,” said Bob Nielsen, Chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “As the price data show, entry-level homes are generally driving the new-home market right now, and that’s because first-time buyers don’t have another home they have to sell.”
“As builders in our recent surveys have been telling us, the lull in new-home sales continued even as mortgage rates held at extremely favorable levels in August. This is partly because continuing tight credit conditions are dissuading even well-qualified buyers, who are having trouble obtaining the good rates that are out there,” said NAHB Chief Economist David Crowe. “However, on a positive note, today’s numbers confirm that builders are wisely refraining from adding to the inventory of unsold new homes, which is currently at a 49-year low.”