Sales Of New Homes Rise 2.7%
September sales of new homes rose 2.7% from August, but economists and housing experts say the turmoil in the financial markets makes it too soon to declare a bottom to the housing market's downturn.
Sales of single-family new construction fell to a seasonally adjusted annual rate of 464,000, down about a third from the pace in September 2007, the Commerce Department reported Monday.
The August to September gain was driven by strong results in the West, where sales jumped about 23% on the strength of some of the biggest price cuts by home builders anywhere in the country.
The report said that the national median price for a new home was $218,400, down from a median price of $221,900 in August.
The sales numbers in September "were only up because they were down so much in August," says Patrick Newport, an economist for Global Insight.
Monday's report on new home sales followed the National Association of Realtors' report Friday showing that existing home sales rose 5.5% in September from August and 1.4% from a year earlier. Existing home sales include foreclosed properties, and the two reports illustrate the impact of falling prices on home sales overall, Newport says.
For example, Newport says, new home sales in the western part of the U.S. were down 37.9% from September 2007, while existing home sales there were up 34.4% from September 2007, according to the NAR .
"What that tells me is that builders can't sell new homes because banks are foreclosing on existing homes," he says. "A builder can't cut his price too much, because he has to cover costs, but a bank can cut the price on the property until it sells. With tumbling home prices, builders can't live in that market. It is happening everywhere, but it is highlighted in the West."
The growing number of foreclosures, particularly in states such as California and Nevada, continue to push down prices of all homes, including new construction.
A recent Fitch Ratings report said prices have fallen about 22% from their 2006 peak, but another 10% decline is likely before prices stabilize in 2010.
"It is very hard for a new home builder to compete with a foreclosed property," says Bernard Markstein, senior economist at the National Association Home Builders. "It seems clear that existing home sales have been increased due to foreclosures, and that is good because you're moving them off the market and getting people into them," he says. "The bad part is that it tends to depress prices more than is warranted."
At the end of September, there were 394,000 new homes for sale nationally, down from 425,000 in August but still more than a 10-month supply at the current selling rate.
"If we could get down to 350,000 or 300,000 we'll be in much better shape," Markstein says.
October new homes sales are likely to be weak, but some recovery is expected in November and December, he says.
"If people shrug off the stock market, we'll be on the path to recovery," Markstein says. "If it takes a couple more months and people are still saying, 'I'm not buying a house,' we've got another step down to go."
Sales of single-family new construction fell to a seasonally adjusted annual rate of 464,000, down about a third from the pace in September 2007, the Commerce Department reported Monday.
The August to September gain was driven by strong results in the West, where sales jumped about 23% on the strength of some of the biggest price cuts by home builders anywhere in the country.
The report said that the national median price for a new home was $218,400, down from a median price of $221,900 in August.
The sales numbers in September "were only up because they were down so much in August," says Patrick Newport, an economist for Global Insight.
Monday's report on new home sales followed the National Association of Realtors' report Friday showing that existing home sales rose 5.5% in September from August and 1.4% from a year earlier. Existing home sales include foreclosed properties, and the two reports illustrate the impact of falling prices on home sales overall, Newport says.
For example, Newport says, new home sales in the western part of the U.S. were down 37.9% from September 2007, while existing home sales there were up 34.4% from September 2007, according to the NAR .
"What that tells me is that builders can't sell new homes because banks are foreclosing on existing homes," he says. "A builder can't cut his price too much, because he has to cover costs, but a bank can cut the price on the property until it sells. With tumbling home prices, builders can't live in that market. It is happening everywhere, but it is highlighted in the West."
The growing number of foreclosures, particularly in states such as California and Nevada, continue to push down prices of all homes, including new construction.
A recent Fitch Ratings report said prices have fallen about 22% from their 2006 peak, but another 10% decline is likely before prices stabilize in 2010.
"It is very hard for a new home builder to compete with a foreclosed property," says Bernard Markstein, senior economist at the National Association Home Builders. "It seems clear that existing home sales have been increased due to foreclosures, and that is good because you're moving them off the market and getting people into them," he says. "The bad part is that it tends to depress prices more than is warranted."
At the end of September, there were 394,000 new homes for sale nationally, down from 425,000 in August but still more than a 10-month supply at the current selling rate.
"If we could get down to 350,000 or 300,000 we'll be in much better shape," Markstein says.
October new homes sales are likely to be weak, but some recovery is expected in November and December, he says.
"If people shrug off the stock market, we'll be on the path to recovery," Markstein says. "If it takes a couple more months and people are still saying, 'I'm not buying a house,' we've got another step down to go."
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