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New home sales up 10%, challenges remain for the sector

New home sales and prices are up, but challenges remain for this hardest hit portion of the housing market, particularly tough competition from the resale market.

New Census Bureau data

According to the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new single-family houses in April 2012 were at a seasonally adjusted annual rate of 343,000, up 3.3 percent for the month and 9.9 percent for the year, further signaling improvements in one of the hardest hit housing sectors. Improvement in any portion of the housing market is welcome news as various indicators show signs of health after years of being battered.

The median sales price of new homes sold in April hit $235,700, marking a 4.9 increase over the past year, with an average sales price of $282,600 in April nationally. The month ended with 146,000 new homes for sale, representing a 5.1 month supply at the current sales rate, outperforming resale homes with a 6.6 month supply.

Rise in sales and prices, but challenges remain

New home builders continue to be plagued by distressed home sales of existing homes as a main competitor, as the National Association of Realtors reports that foreclosures sell for an average discount of 21 percent below market while short sales sell for an average discount of 14 percent below market rates.

While sales performed well nationally, each region was literally and figuratively all over the map. New home sales plummeted 10.6 percent in the south, and rose 7.7 percent in the Northeast, marking the region’s highest level in over a year. The West region increased 27.5 percent and the Midwest rose 28.2 percent, both helping boost the national sales data.

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Builder confidence for this period remains at a five year high, according to the National Association of Home Builders, yet a rise in traffic and optimism for sales in the next since months have not persuaded builders to throw caution to the wind and remain guarded with their optimism toward a recovery.

Despite low inventory levels, and beating expectations for pricing, the tough competition from the resale market will continue to be a challenge to new home builders, as will the continued tight lending conditions not only for builders but consumers, particularly first time buyers.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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