October 27, 2008
It's always darkest before the dawn, the saying goes. And while the
economic landscape does indeed look very gloomy at the moment, there
is an encouraging sign of life in the nation's battered housing
market.
The U.S. Commerce Department reports the sale of new homes rose 2.7 percent in September, improving off a 17-year low. Driving sales was another decrease in the median price of a new home, which is now down to 2004 levels.
Analysts are quick to add a "yes, but" to this meager bright spot. They point out that most of these numbers were registered before the sudden escalation of the credit crisis at the end of the month. The crisis, they warn, could tamp down any upward momentum.
Still, the increase in new home sales comes on the heels of a similar increase in existing home sales. In both cases, buyers were drawn back to the market by falling prices, a key ingredient for any housing recovery.
And, as in the cases of existing homes, the inventory of new homes on the market declined in September. The supply of available new homes fell from 11.4 month's worth to 10.4 months.
The increase in sales was paced by a 23 percent surge in the West, where California's ravaged real estate market recorded a huge increase in sales in the Southland counties last month. That helped offset a continued sales slump in the Northeast, were sales dropped 21 percent, and in the Midwest, where sales were down 5.8 percent.
Joel Naroff, chief economist at Naroff Economic Advisors, in Holland, Pa., says the fact that the median sale price is falling is good news.
"Homes, both new and existing, have become more affordable," he said. "Only five percent of the new homes sold went for $500,000 or more. In 2006 and 2007 those shares were about twelve percent. Also, the number of homes for sale keeps falling, as builders are not building a whole lot anymore."
No one is calling this a bottom, but an increasing number of economists are encouraged that the bad news about housing has at least slowed.
