New Construction Stats
October’s new home sales stats are in and the 6.2% rise in sales easily beat speculators’ estimates after a rough year in real estate sales. Transaction levels in new home construction vary across the nation, and Realtor Danelle Guilbeau of Boulevard Realty in Houston, Texas said, “we saw a year over year increase in sales of 13.8%, however, I take that with a grain of salt. October 2008 was when we were struck with Hurricane Ike and we saw major declines in home sales for the next few months. This is the second month in a row in which we have had a great year over year increase.”
Analysts aren’t getting excited about the uptick either as they point to factors such as the tax credit that caused a run up in sales prior to the extension, getting some builders excited and their hammers swinging yet stagnant traffic so far in November. Unemployment rates have yet to return to a healthy level and Reuters reported that the Midwest saw a 20% dip in sales, indicating that not all segments across America are particularly poised to help this trend moving forward.
“I hope that this is a trend upward, but I will still remain guarded as Houston has always done well because the cost of living is so low, comparatively speaking, to other markets. I assume some of the national increase is due in part to the push for home sales by using the tax incentive. Now that it has been extended and we have essentially been “crying wolf” regarding the need to utilize it before it expires may end up having a negative impact over the next couple of months. I’ll be watching and waiting to see,” said Guilbeau.
These are tricky times and while some are cynical, others are optimistic yet guarded, but in rough times like these, most people whose own mortgages rely on the sale of real estate choose to cling to any glimmer of hope for recovery.
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New Home sales are up and Existing Home sales are up. A good sign? Yep. It’s only temporary, though. The tax credit won’t last forever and unless lending loosens up a bit and mortgage rates stay low, we’ll be seeing another downturn by the end of the 3rd quarter or beginning of the 4th quarter in 2010.
The other part of New Home sales is the decrease in inventory (as is Existing Home sales). If builders start going nuts, again, and build on any piece of vacant land they can find, they’ll find themselves in the same hot water. Let the inventory shake out. Supply and demand. If we can get the supply down to a level that matches the number of buyers that are both financially qualified and motivated to purchase, we’ll see some light at this end of this long, dark tunnel.
Two comments: 1-All real estate is local. 2- Mortage rates are currently at historic lows, however, there’s a good chance that when Uncle Sam stops purchasing mortgage backed-securities at the end of March, interest rates could start rising.
Just a heads up, those stats for Houston were all single family home sales. New home sales stats vary greatly by market area in Houston.
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I think it will be interesting to look at the total number of home sales in 2009 against a 20 year chart. And then compare the national total sales volume to a 20 year chart too. I have found that inventory and demand fluctuate wildly from one town or region to another.
I am glad that you mentioned that the numbers used were compared to a post hurricane scenario, especially since my long-term memory was wiped clean when I switched to Windows 7.