Posted on Wednesday, February 24, 2010
According to US Census Bureau numbers released this morning, new home sales in January 2010 were down 11.2% from last month/December 2009 and down 6.1% from last year/January 2009. Last month 3 of the 4 US regions showed a decline in new home sales; 35% down in the NE, 12% in the W and 9.5% in the S. Only the MW rose 2.1% Perhaps more importantly, this is the lowest level yet and may indicate that the home buyer tax credit just isn’t enough (but remember this is only NEW home sales are a leading indicator based on contracts – which can cancel and not result in actual sales - and only about 6% of the market, EXISTING home sales is actually a bigger part of the market – which are based on actual closings). Most experts predicted sales would climb but this hiccup may be evidence that everyone who wants to buy a new home now has already taken advantage of the tax credit and support for the drawn out bumpy bottom or double dip we’ve been talking about. When sales go down, prices are likely to follow as inventory increases and folks have to be tempted with real bargains. There’s a 9.1 month inventory now, the highest since May 2009. The estimated 3 million homes that will be foreclosed in 2010 will not doubt drive prices down further. Median home price also decreased in January compared to last January, to the lowest since December 2003.
A few things are happening to help keep new home sales at least somewhat afloat;: Demand will build again as new households are naturally created, builders got the message and started designing and building homes folks felt comfortable buying (more modest, conservative, appropriate verses. McMansions) last year and that product is now coming to market, interest rates are still low but talk of increases is getting folks off the fence, unemployment is at least not worsening, .perhaps most important, prices are right: in line or under historical averages, rent to own ratio and income to price ratio. Buyers may realize if they don't buy now prices will eventually be higher than they are now (thought they may get a bit lower first, but true investors know you need to buy when its right, waiting for the bottom risks missing it altogether).