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New Single-Family Home Sales Down, Inventory Up in July
The pace of new single-family home sales dipped 4.3% in July to a seasonally adjusted annual rate of 1.072 million units, the U.S. Commerce Department reported last Thursday, 21.6% below the record monthly high set last July and leaving sales for this year’s first seven months 14.2% below where they were for the same period of 2005.
“The slowdown in demand has been on our builders’ radar screens since the middle of last year,” said NAHB President David Pressly. “Builders have been offering sales incentives and slowing their production as demand cools and inventories rise, and our surveys suggest that the downward correction in sales from last year’s record pace still is underway.”
“The current downswing in home sales reflects both falling affordability and a pullout by investors/speculators that were a major factor behind the unsustainable pace of new home sales last year,” said NAHB Chief Economist David Seiders. “We’ve seen an inevitable mid-cycle correction of housing market activity from the records posted last year.”
Sales for July were down 21.3% in the Midwest and 8.0% in the South but up 1.8% in the Northeast and 11.7% in the West. On a year-to-date basis, however, all four regions were substantially below sales rates last year.
The inventory of new homes for sale rose to 568,000 units at the end of July, a 6.5-months supply at the current sales pace.
Completed homes for sale represented 24% of the inventory; those still under construction accounted for a 57% share of the inventory; and permitted units not yet started were 18%. Completed homes for sale were on the market for a median 3.8 months in July, up slightly from 3.7 months a year earlier.
“With respect to the housing market outlook, we’re counting on solid demographic foundations, forward economic momentum, a favorable interest-rate structure and aggressive builder sales incentives to limit the depth and duration of the current downswing in new homes sales,” Seiders said. “We expect the market to bottom out during the first half of next year and then move to a solid, sustainable trend.”
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