Economic News

New home construction sales and prices increase

New home construction is improving

According to the U.S. Census Bureau, the pace of new home sales rose in January, exceeding forecasts and revised the December stats to reflect a higher rate of home sales, all of which is good news for a suffering new home construction sector. This growth is in line with recent reports of builder confidence levels rising across the nation.

The inventory levels of new homes for sale fell, marking the eleventh consecutive month of decreasing supply levels. The current supply sold at the current sales pace represents a 5.6 month supply, down considerably from the 7.2 month supply just one year ago. Compared to January 2011, the number of new homes sold has risen 3.5 percent nationally with particularly strong sales in the South which has increased 15 percent.

This has helped builders to increase prices despite heavy competition from distressed homes for sale, with the median price hitting $217,100. According to the Census Bureau, 22 percent of homes sole in January cost less than $150,000 while 19 percent were sold for $150,ooo – $199,999 and the largest portion of sales (33 percent) were on homes that are $200,000 – $299,999. Fully 14 percent of new homes sold in January were $300,000 – $399,999, six percent were $400,000 to $499,999 with only 7 percent selling for over $500,000.

This distribution is very similar to January 2011, with two minor shifts – the volume of homes sold for under $200,000 saw an increase while homes in the $200,000 – $299,999 and $400,000 – $499,999 price ranges dropped slightly. This is no surprise given the pressure on the market from distressed sales which continue to account for one in every three homes sold in America.

The median number of months a new home sits for sale after completion is at 7.1 months, down from 7.4 months last January and down dramatically from the peak last summer of 10 months.

New home builders still have a long recovery ahead of them and few project 2012 to be the year that it will happen, but vital signs are slowly coming back for the sector which is positive news for the housing sector overall.


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