Real Estate Outlook: New Homes Sale Decline
by Carla Hill
Tuesday, August 14, 2012
New home sales fell for the month of June, according to HUD and the U.S. Census Bureau. The pace of sales for newly built, single-family homes slowed 8.4 percent to a seasonally adjusted annual rate of 350,000 units.
This followed strong numbers for the month of May. What is causing this downward jump?
"The lower number of new-home sales in June represents an adjustment from a robust level of activity in May, yet overall results for the second quarter show we are still on track for continued improvement," observed NAHB Chief Economist David Crowe. "That said, the very tight inventory of new homes for sale at this time poses a challenge to builders, who’d like to have a larger selection for buyers to choose from but continue to confront issues with obtaining credit to build viable new projects."
Regionally, results are mixed. The Midwest and West experienced gains of 14.6 and 2.1 percent. It was the South and Northeast, however, that struggled.
The South fell 8.6 percent, but the Northeast decline by a staggering 60 percent for the month of June.
"While we would have liked to see a third consecutive month of new-home sales gains in June, the fact remains that the sales numbers are up on both a quarterly and yearly basis, while builders continue to report that they are seeing more serious buyers in the market for a newly constructed home with all of the latest updates," said Barry Rutenberg, chairman of the NAHB.
The remodeling market also slipped in June, according to the Remodeling Market Index (RMI). The RMI fell two points overall, but experienced the steepest decline in the Northeast and West, down 6 and 4 points respectively.
"Remodelers have some backlog of jobs and along with higher quality leads, this is making them cautiously optimistic about the near future," said NAHB Remodelers Chairman George Moore Jr. "The positive outlook is constrained by continuing credit constraints and inaccurate appraisals that make customer financing difficult for big jobs like additions and whole house remodels."
Despite these economic setbacks, the rate of homeownership continues to hold steady, albeit at a depressed rate.
The latest Census Bureau findings show the seasonally adjusted homeownership rate is at 65.6 percent for the second quarter of this year. This is the same 15-year low seen for 2 quarters now.
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