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Five-Month Climb in New Home Sales Ends in September
After five consecutive months of increases, sales of newly built, single-family homes fell 3.6% in September to a seasonally adjusted annual rate of 402,000, according to data released by the U.S. Commerce Department on Oct. 28.
"This critical loss of momentum corresponds with the ending of the $8,000 first-time home buyer tax credit, since for the most part, September was too late to sign a deal that could be completed by the time the credit expires at the end of November," said NAHB Chairman Joe Robson.
"The fact that sales are now heading downward just shows how important the tax credit has been for stimulating buyer demand up to this point, and how essential it is for Congress to move quickly on legislation that would extend the credit's expiration date and expand its eligibility to more buyers,” Robson said. “Doing so would keep the housing market on the road to recovery while stimulating much-needed job growth across the economy."
Robson noted that extending the tax credit's effective date for one year and expanding it to include all home buyers would generate nearly 350,000 jobs; $28.2 billion in wages, salaries and business income; and $11.6 billion in additional tax revenues.
"The fact that this is the first time in five months that sales have declined indicates that the tax credit's impending expiration is already having a negative effect on housing demand," said NAHB Chief Economist David Crowe.
"Given the crucial importance of housing to the national economy and the fragile state of the nascent recovery, extending and expanding the credit should be a top priority for Congress,” he said. “Home builders are already doing what they should by keeping a lid on the supply of new homes, but the combined threat of the credit's expiration and the poor job market make the likelihood of improving home sales extremely remote."
The inventory of new homes on the market continued downward for a 29th consecutive month in September, to 251,000 units. This was the smallest inventory since November 1982. As a result of the slower pace of sales, however, there was a 7.5-month supply of new homes on the market, the same as in August.
Crowe noted that the Midwest, which unlike all other regions posted a significant gain in September home sales, was one area where buyers still had a last-minute opportunity to sign a deal in time to take advantage of the tax credit because of the lower volume of sales in the pipeline.
On a regional basis, new-home sales skidded 10% in the South, which is the nation's largest housing market, and 10.6% in the West. The sales rate remained unchanged in the Northeast in September, but jumped 34% in the Midwest due to last-minute deals sparked by the tax credit.
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