New Home Sales Droop, Housing Recovery Lags

New home sales of single-family homes declined 16.9% in February, reaching a record-low seasonally adjusted annual rate of 250,000 units, according to Commerce Department data released Wednesday.

“Today’s report is primarily a reflection of consumer uncertainty regarding the overall economy,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “A recent Gallup poll confirmed that the economy is Americans’ top concern right now. At the same time, even qualified buyers who are ready to make a purchase are facing frustrating challenges in terms of tight consumer lending conditions and inappropriately low appraisal values on new construction.”

The February seasonally-adjusted rate is the lowest since 1963, when records of new home sales began. The data fell short of economists’ estimates, which projected closer to 290,000 seasonally-adjusted units.

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“February’s sales numbers add to the mounting evidence that the housing recovery is hesitating along with the inconsistent progress of the economic recovery,” acknowledged NAHB Chief Economist David Crowe. “Another problem, however, is consumer perceptions of where home values are headed, particularly when national indexes do not reflect local markets.” Meanwhile, he said, “The continuing fragile state of the housing market should serve as a flag of caution to policymakers who are considering major changes to the nation’s housing finance system and to crucial tax incentives for homeownership such as the mortgage interest deduction.”

See the Commerce Department’s data release.

Written by Elizabeth Ecker

 

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  • As the former VP of Finance and Controller for a developer, this type of language is as strong as you will find about the direction of home values from a building trade association when values generally are going down. In working with a developer in one state, they are looking at the acknowledged value of their improvements being less than the sales price of a new home with exactly those improvements. This means either the value of the land is negative or the improvements in the neighborhoods where they are building are considered “overbuilt.” Yet looking at the areas they are developing, they are not overbuilding in the traditional sense of that word.

    As to the building industry except for a very few bright spots, these are not the best of times in the US. Few builders have yet figured out how to make anything close to traditional profits. For far too many, the risks outweigh the rewards. Yet the population in the country is growing.

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