May 2012 New Home Sales Sail to Surprising Heights Gaining 7.3%

Written by: Alan Edwards

The United States got some good news on the first Monday of summer – new home sales rose 7.3 percent to levels not attainted since April, 2010 the last month that buyers could qualify for federal home-buying tax credit. This is reinforcing evidence that while the United States economic recovery from the Great Recession of 2008 is continuing, albeit at a sluggish rate of growth.

The report, issued by the United States Census Bureau and the United States Department of Housing and Urban Development, indicates that new home sales have reached an annual level of 369,000 homes per year. That compares with the revised April 2012 number of 343,000. While this is promising news that beat economist’s forecasts by 19,000 units it is far short of the annual rate of almost 1.4 million homes built during the height of the real estate boom, and little more than half the 700,000 units that economists suggest is the sustainable number is a recovered housing sector.

Supporting the unexpected strength in new home sales is a report that home builders filed for permits to build new homes at a rate not seen since September, 2008. Additionally, mortgage rates found its way down to record lows.

In fairness, new home sales may have been partly responsible for the dip in existing home sales that was seen in May. Existing home sales dropped by 1.5 percent in May. Nevertheless, existing home sales are way ahead of the same period for last year.

Of the residential home market, new home sales account for a bit less than 20 percent of all home sales. Their contribution to the economy is great. According to the National Association of Home Builders, each new home built creates three new jobs and on average adds $90,000 in tax revenues.

Residential Home Building growth was uneven across the nation.

Sales were up in the Northeast by a whopping 36.7 percent and in the South by a respectable 12.7 percent. However, they stumbled by a negative 3.5 percent in the West and declined by 10.6 percent in the Midwest.

Though new home prices fell a bit (0.6 percent) since April they are 5.6 percent higher than a year ago. In May, the average price for a new home was $234,000.

What the news about new home sales means is best summed up by Robert Dietz of the National Association of Home Builders. According to Mr. Dietz; “This improvement indicates that 2012 will be a year of gradual growth for new homes,” he said. “It also means that we’ve seen the end of inventory that’s climbed the last couple of years.” Regarding the economy, Dietz said: Each new home represents three full-time jobs. That’s just good for the economy overall.”


May 2012 New Home Sales Sail to Surprising...

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