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Economic News

New home sales up for the year, inventory levels at record low

The light at the end of the new home builder tunnel is finally becoming apparent, however dim. This hard hit sector is seeing an increase in sales, starts, and permits, but continues to be cautious with their optimism.

New home sales down for the month, up for the year

Sales of newly built, single-family homes slowed 1.6 percent to a seasonally adjusted annual rate of 313,000 units in February, according to data jointly released by HUD and the U.S. Commerce Department today. Earlier in the week the Commerce Department reported a 5.1 increase in building permits in February and a 34.7 percent increase in housing starts over the year.

Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) notes that traffic in new home models is up but tight lending and appraisal issues “continue to pose significant obstacles to prospective purchasers,” as they have for several years. “These hurdles are definitely slowing the momentum of the housing and economic recovery.”

NAHB Chief Economist, Dr. David Crowe said in a statement that in February, there was greater buying activity in the over-$200,000 rang, suggesting buyers with higher incomes can qualify more easily, while first time buyers looking in lower price ranges may have a more difficult time getting qualified.

Sales skyrocket in the Northeast

Regionally, new-home sales increased 14.3 percent in the Northeast and 8.0 percent in the West, but declined 2.4 percent in the Midwest and 7.2 percent in the South in February. Meanwhile, the inventory of new homes for sale held unchanged at a record low of 150,000 units in February, representing a 5.8-month supply at the current sales pace.

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“To some extent, we believe that exceptionally good weather conditions in December helped pull some home sales forward that would otherwise have occurred in January and February, which partially accounts for the declines we’ve seen at the beginning of this year,” added Dr. Crowe. “However, the February sales rate is still 11.4 percent above its year-ago level, and the quarterly average sales pace is at a two-year high. Meanwhile, the inventory of new homes for sale remains at an all-time record low, in part because of the lack of available financing for new-home production.”

Similarly, existing home sales are up 8.8 percent for the year and the National Association of Realtors President, Moe Veissi noted that market conditions are improving. “Supply and demand have become more balanced in more markets, but with tight supply in the lower price ranges – particularly in the West. When markets are balanced, we normally see prices rise one to two percentage points above the rate of inflation, but foreclosures and short sales are holding back median prices.”

Despite increasing permit levels, sales, and starts, builders remain cautious in their optimism, with confidence levels at a five year high this month, yet not surging at a dramatic rate.

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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.



  1. Baltimore Real Estate

    March 24, 2012 at 5:05 pm

    In Baltimore, MD most sellers do not want to sell at market lows unless that are distressed or relocating. This has contributed to the lower than average inventory we are experiencing in Maryland. As a result, buyers are looking at new construction as an alternative. In time, the lower inventory levels will put increased presssure on pricing as demend growns and we come out of the housing recession.

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