A new post on new homes ...
* New home sales rose 3.4% between October and November, vs. forecasts for a 1.6% gain. The seasonally adjusted annual rate of sales hit 1.047 million units, up from 1.013 million units in October. However, that’s still down 15.3% from a year earlier (1.236 million in 11/05)
* The supply of homes for sale slipped to 545,000, or 6.3 months at the current sales rate. That’s down from 558,000 and 6.7 in October. However, we are only down 28,000 units, or 4.9%, from the all-time U.S. inventory record of 573,000 units for sale in July. That 573,000 reading, by the way, was a 96% rise from the 2001, pre-boom low.
* Median prices even rebounded up 5.8% year-over-year from last November to $251,700. That’s the biggest YOY gain since June. In fact, prices aren’t far off their high to date of $257,000 in April, if you believe these stats. I personally don’t think they’re capturing the huge amount of incentives being thrown at buyers. Many builders are also slashing list prices – by as much as 20%, 30% or more in my market down here.
Interest rates started falling in the summer. But home sales didn’t react at first – they remained weak. That changed last month. Mortgage rates finally came down enough to spark buyer interest, causing sales and home prices to bounce off their lows.
But I wouldn’t break out the New Year’s bubbly just yet.
For one thing, interest rates have leveled off again. You can see the impact that’s having in the Mortgage Bankers Association’s weekly purchase application index. It dropped almost 6% two weeks ago and another 11% in the most recent week. Some of this could be holiday-related "noise." More likely, it’s that this rate-fueled bounce is running out of gas.
For another thing, there’s the massive inventory overhang we’re dealing with. A 5%, four-month decline isn’t much when you consider the five-year, 96% run up that preceded it. And that’s just the new home market. The market is flooded with existing homes, too.
Longer term, the approaching spring selling season is for all the marbles. I expect many of the homes that didn’t sell last year – and that were pulled off the market for the holidays – to hit the MLS in the spring. Throw in the tepid economy and a likely tightening in mortgage standards, and I think you have a recipe for disappointment. In other words, look for the housing market to remain weak in 2007.