A nationwide survey of homebuilders reveals an increase in sales but reduced expectations for the next six months, reflecting concerns about a potential expiration of the first-time homebuyer tax credit and competition from foreclosures, problems with appraisals, and lack of job creation.
The survey of 269 builders, by John Burns Real Estate Consulting, found sales in 1,855 housing developments in 86 metropolitan statistical areas increased to two per month, up from 1.4 in last month’s survey. Falling cancellation rates were a factor, with most respondents (61 percent) reporting cancellations at between 1 percent and 15 percent.
On a scale of one to 10, builders rate current sales of new single-family detached homes at 3.5, unchanged from last month but up from a low of 0.5 in December.
Asked about their expectations for new-home sales over the next six months, however, builders were more pessimistic than last month.
At 3.5 on a scale of one to 10, the national rating of expected sales was down from 4 last month, but well above the low of 1 registered in December. Ratings were up in the Northwest (up one point, to 3.5), South Florida (up two points to 7.5), Northern Florida (up 0.5, to 4), and the Southeast (up 0.5, to 3).
New housing developments had an average of 3.7 unsold completed homes, up from 3.2 homes in last month’s survey but far off the annual high of 5.3, registered in January.
Builders "aggressively started (constructing) speculative inventory during the summer to capture last-minute buyers" before the first-time homebuyer tax credit expires, the report said. If Congress does not pass legislation extending or even broadening the credit, it will expire Nov. 30.
Some entry-level buyers are so focused on buying homes that can close by Nov. 30 that some builders without standing inventory are losing sales, the report said. …CONTINUED
On the other hand, builders in some markets who started homes on "spec" this summer are not achieving the sales they anticipated, possibly because they have not dropped their prices enough, the report said.
Builders rated prospective buyer traffic as below-average in all but one market — South Florida. On a scale of one to 10, South Florida rated a six — well above the national average of 2.5.
Other markets where traffic exceeded the national average, but remained below average, were Southern California (3.5), the Northeast (3.5), and North Florida (3).
Traffic in Northern California, the Northwest and Texas was the same as the national average (2.5). Markets with the lowest ratings for prospective buyer traffic were the Southwest (1.5), Southeast (1.5) and Midwest (2).
Builders reported prices moving up in the last month in three of 10 markets — Northern and Southern California, and South Florida. Inventories were decreasing in all 10 markets, builders said, with the biggest decreases in those three markets and the Southwest.
Whlie prices were appreciating in California, they were flat elsewhere. Housing starts declined in all but two of 10 regions — Northern California and Southern California — as builders lacked financing to start new construction, the report said.
The findings of the John Burns survey are supported by an index gauging builder confidence maintained by the National Association of Home Builders. That index is made up of three components.
While components gauging current sales and traffic of prospective buyers were up, the third index gauging sales expectations for the next six months declined one point — which NAHB Chief Economist David Crowe attributed to awareness of the impending expiration of the first-time homebuyer tax credit, a lack of credit for housing production loans, and continuing problems with low appraisals (see story).
Strong growth in multifamily construction starts pushed overall housing starts up 1.5 percent in August, to a seasonally adjusted annual rate of 598,000 units, according to figures released by the Census Bureau today.
But production of new single-family homes declined 3 percent in August to a seasonally adjusted rate of 479,000 units a year, ending five months of consecutive growth in single-family starts. Builders pulled permits to build single-family homes at an annual rate of 462,000 in August, down two-tenths of a percent from July, ending four months of gains. …CONTINUED
Builders are pulling back on single-family construction because "the window is now basically closed for being able to start a new home that can be completed in time for purchasers to take advantage of" the first-time homebuyer tax credit, said Tulsa builder Joe Robson, chairman of the National Association of Home Builders (NAHB), in a statement calling on Congress to extend the credit.
The Mortgage Bankers Association and the National Association of Realtors are also pushing for an extension of the tax credit, and for Congress to make it available to more than just first-time homebuyers. The existing credit — equal to 10 percent of a home’s purchase price, with a ceiling of $8,000 — has brought 1.2 million new buyers into the market, 350,000 of whom would not have purchased a home without it, NAR claims.
Sen. Johnny Isakson, R-Ga., has introduced a bill, S 1230, the Home Buyer Tax Credit Act of 2009, that would not only extend the credit by one year from its enactment, but increase the ceiling up to $15,000, and expand the pool of those eligible to claim it by lifting first-time homebuyer and income restrictions. The bill has 16 co-sponsors, including Sen. Chris Dodd, D-Conn., the chair of the Senate Banking Committee.
Isakson introduced a similar bill last year, which the Congressional Budget Office estimated would cost $34.2 billion.
A White House spokesman told reporters Wednesday that the president’s economic team is evaluating the tax credit’s impact on home sales, and will make a recommendation to the president.
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