Housing purchases up slightly, but…
posted at 3:25 pm on November 28, 2011 by Steve Eggleston
The Associated Press has some “good” news and some disturbing news on the housing front:
New-home sales increased 1.3 percent last month to a seasonally adjusted annual rate of 307,000, the Commerce Department said Monday. That’s less than half the 700,000 that economists say must be sold to sustain a healthy housing market.
September’s figures were also revised down significantly to show a weaker pace than first estimated.
Last year’s 323,000 new homes sold were the fewest since the government began keeping records in 1963. This year isn’t faring much better….
Many builders have stopped working on new projects because they can’t obtain financing. The number of new homes for sale in the United States fell in October to a record low of 162,000.
They are also struggling to compete against cheaper re-sales, even as they lower their own prices. The median sales price of a new home fell 0.4 percent in October from September, to $212,300.
Looking through the release itself, 2011 is actually faring worse. Through October 2010, 279,000 new homes were sold in 2010. Through October 2011, 260,000 new homes were sold in 2011. It also looks like Ed’s warning from the other week on new housing starts/permits is operative:
Permits went up 10.9%, but many projects that get permits don’t get built if builders don’t see a market for sales. Completions are still down 5.7%, which is the residual effect of declines in building in earlier months, but single-family completions are up 7.1% in October. That means builders see a reason for more confidence — but also that inventories have expanded. If sales rise in the next couple of months, this will be a good sign; if not, it will dampen construction again.
The news isn’t much better on the existing home market. Last week’s National Association of Realtors report, referenced at the end of the AP story, also paints a mostly-bleak picture. Even while existing home sales rose by 1.4% from September (on a seasonally-adjusted basis) and 13.5% from October 2010 to a seasonally-adjusted annual rate of 4.97 million, far short of the 6 million economists expect in a healthy market. Further, while the percentage of “distressed homes” sold fell to 28% from 30% in September and 34% in October 2010, the median price slipped 4.7% from October 2010 to $162,500. Worst of all, contract failures, defined by NAR as “cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses”, jumped to 33% in October from 18% in September and 8% in October 2010.