New Home Sales Climb Nearly Ten Percent
Wednesday, August 26, 2009; 4:24 PM
Sales of newly built homes jumped 9.6 percent in July, rising for the fourth month in a row and adding more evidence that the housing market is on the mend.
The Commerce Department reported Wednesday that sales climbed to a seasonally adjusted annual rate of 433,000. That's the highest pace of sales since September 2008, when an additional 3,000 homes were sold. The July figures are up from the revised rate of 395,000 in June.
Sales picked up in three out of the nation's four geographic areas, with a sizable gain of 16.2 percent in the South, the nation's largest-selling region, which includes the Washington area. Sales fell only in the Midwest, by 7.6 percent.
The report reaffirms the positive trends reflected in other national housing market indicators. Yesterday, two closely watched indexes found that home prices were rising in most parts of the country. Home sales, construction activity and builder confidence have all risen in recent months.
Home builders, along with the housing industry at large, have benefited from historically low interest rates and a relatively new $8,000 federal tax credit available to first-time home buyers, both of which have fueled demand for homes.
The market is still far from healthy by any measure. Sales of newly built homes were down by 13.4 percent in July from the same time a year ago. Also, the new homes market is not nearly as large as the market for previously owned homes. New home sales made up roughly 7.6 percent of sales in July.
But the builders have made huge strides in whittling away at the over supply of homes, which is key to regaining their footing in the market.
The builders have instituted dramatic cutbacks in home construction, either voluntarily or because they were forced to after their financing was cut off.
The end result is that the raw number of new homes for sale at the end of July was 271,000, the lowest reading since March 1993.
If sales continued at the same pace, that would leave a 7.5 month supply of homes on the market, well below the 12.4 month supply in January and the 8.5 month supply in June, said Michael Larson, a housing analyst with Weiss Research.
"But buyers are still going to have the upper hand for the next 12 to 18 months," Larson said. "It will take a long time to get supply and demand into equilibrium on both sides of the ledger."