The number of new homes sold increased 5.7% in September to a level of 313,000. The average for the third quarter remains just above 300,000 as it was in the first and second quarters. So, while the monthly increase shows some promise ahead for the new home market, the levels remain near record lows as buyers continue to be concerned about their own economic future and as difficulties in credit qualification and appraisals retard those who are in the market. At best, this is a promising prelude to improvement in 2012.
Inventories remained at an historic low level as builders hold back on new construction until more consistent sales signals arrive. The total number of new homes for sale constitutes a 6.2 month’s supply at current sales rates, which is in line with historic equilibrium levels. But, it is the low sales rate rather than the low inventory that drives the indicator to a comfortable level. The number of completed new homes for sale remains at a record low of 61,000, which for comparison sake is a normal year’s output of single-family homes in one large metropolitan area.
Median sales prices fell 10% on a year-over-year basis, but that has more to do with a change in composition than a change in individual home prices. More homes were sold in the $150,000 to $200,000 range as first time home buyers continue to dominate the home buying market. And, home sales picked up more in the South than other regions also where home prices tend to be more modest. These two trends will tend to push down the home prices because of different homes being sold. First time home buyers don’t have a home to sell and those who can qualify for a mortgage and have a down payment are taking advantage of the low mortgage rates and house prices.
Even with the improvement, new home sales in 2011 will come in at a 50-year historic low rate that just barely breaks 300,000. The previous low was recorded in 2010 and before that in 2009 and before that in 1982.