New Home Sales Gather Steam

Written by: Alan Edwards

While it came as no surprise, the news was still welcome, as the latest release from the Commerce Department reported that sales of new homes climbed 4.4 percent in November to a seasonally adjusted number of 377,000-unit annual rate. This was in line with forecasts by analysts that the economy would achieve a pace of 370,000 units for the month. This was the fastest new-home sales have been since April 2010. And while the Commerce Department number is subject to significant revisions, such as reducing its estimate for the preceding month by 7000 units, the news is welcome at a time when there is little to be happy about as the country is losing ground in other sectors due to fear that the country is unable to solve problems associated with the so-called “fiscal cliff.”

Interestingly, most economists believe that housing related finances were responsible for the United States economy entering its worst recession since the Great Depression as during 2012 the housing sector has been one of the bright spots in the United States economy, which is facing falling business confidence and falling demand for products that we export overseas.

Year-to-year data show that the median price of a new home soared nearly 15 percent over the last 12 months. The median new home price is now $246,200.

The is the first time since 2005 that new-home building is expected to be a plus for economic growth. However looking at the housing sector in totality one can’t help but be reminded that this recovering sector is but a fraction of what it used to be. The pace of new home sales today is approximately ¼ of the all-time high recorded in the summer of 2005 while the housing bubble was still growing. Shortly after the summer of 2005 the bubble began leaking and then burst; it was a major factor in the 2009 recession.

The current supply of new homes was reduced to 4.7 months compared to the preceding month which recorded a 4.9 month inventory.  Even so there were 149,000 new homes for sale in December which was a 2000 home increase over the 147,000 recorded in October. The four housing regions split with two showing increases and two showing decreases. The Southern Region led by a 21.1 percent increase in new home sales. The Northwest Region increased by a team or 12.5 percent new-home sales in the West fell by 17.8 percent while the Midwest recorded a decrease of 12.5 percent.

Part of the increase in home prices is due to increases in construction costs.  Toll Brothers is one of the largest homebuilders in the United States, Douglas Yearley, the company CEO stated that “pent-up demand, rising home prices, low interest rates, and improving customer confidence motivated buyers to return to the housing market in fiscal year 2012.” Yearley also said based on current market conditions he was confident that 2013 would enjoy a sustained housing recovery.


New Home Sales Gather Steam

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