New Home Sales Way Down
Dec 29th, 2007 @ 7:01 PM by Alden Smith
The biggest thing in the news seems to be the fact that new home sales are way down – they have dropped to their lowest level in more than 12 years. According to a Census Bureau report issued Friday, in November new home sales fell to a seasonally adjusted annual rate of 647,000. Economists had predicted a 715,000 sales pace forecast, and it appears it has fallen very short of that. Currently sales are down more than 1/3 from last year’s levels. This is certainly not a local thing either, with sales in the Northeast down 28%, and in the Midwest 38%. California isn’t looking good, either.
These figures are less than accurate. A sale is considered made when a contract is signed. If the contract does not make it through the lending process, the sale is still confirmed anyway. So margin of error is a considerable factor in this situation. No one seems to really know for sure.
The major builders are also reporting a sharp increase in cancellations of new contracts. Buyers are struggling hard to sell their existing homes without a lot of success, and many lenders are just not making the deal for them.
In November, the median sales price was at $239,100, which is a 4.2% jump from October. The October forecast, though, was the lowest it has been in more than two years. The new figure represents a drop of 0.4% from levels a year ago, and is 8.9% off the former record high in March of $262,600. Remember, this is before the meltdown begin.
New home builders are the ones really felling this pinch. They at present are typically waiting 6.2 months to sell a new home, even with good incentives. Horton Builders (HDI) has reported a loss in the past two quarters. Hovian (HOV, who is the number 6 builder in the nation, has taken an even larger hit. And earlier this month, luxury home builder Toll Brothers (TOL) reported its first loss in 22 years. Don’t hold your breath waiting for this to go away soon.