Editor’s note: This article is republished with permission of Builder magazine. View the original article: "New Home Sales Decline, Prompting Predictions of Worst Year on Record."
Sales of new homes fell for the third straight month in July, and estimates for April, May, and June were revised down, fueling fears that this year will be the worst on record. Sales declined 0.7 percent from June, registering an annual rate of 298,000, according to data released by the U.S. Census and the Department of Housing and Urban Development. While new-home sales improved 6.8 percent on an annual basis, that number is skewed by the market upheaval caused in July 2010 by the expiration of the homebuyer tax credit.
"Last year, our estimation for new-home sales was 321,000," says Patrick Newport, U.S. economist at IHS Global Insight. "This year, we estimate sales will stand at 319,000, but that number will probably be lowered due to downward revisions. It’s shaping up to be the worst year on record for new homes. Data start in 1960, but even if the data went back another 20 years, this year would probably still be the lowest."
As builders continued to pull back on projects, inventory of new homes for sale fell to a record low 165,000 units, a 6.6-month supply at the current pace. Low inventory will be a boon when the market turns, however, recent reports of permits pulled don’t provide much hope of that turnaround coming in the near future.
While the median sales price among new homes fell 6 percent to $222,000, the average price gained 1 percent to $272,000. Homes priced between $200,000 and $299,000 fared the best during July, claiming 36 percent of the market. Numbers dropped off precipitously in higher price ranges, with homes priced between $400,000 and $499,000 claiming to only 4 percent of total sales.
© 2011 Hanley Wood. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without the prior written permission of Hanley Wood.