By Mark Huffman
ConsumerAffairs.com
July 27, 2009
In yet another sign that the U.S. housing market may be in recovery mode, the Commerce Department reports sales of new homes jumped 11 percent in June. It's the biggest one-month gain in eight years.
At the same time, sales have a long way to go before reaching "pre-meltdown" levels. Though sales were up sharply over May, they were down 21 percent from June 2008.
According to the report, new homes sold at an annual rate of 384,000, the most since last November. Inventories were down sharply, as the number of new homes for sale hit its lowest point in the last ten years.
The numbers are considered all the more impressive because it came in the new home sector. Existing homes have increased over the last five months, largely because prices have fallen, fueled by foreclosures. With new homes, builders have less wiggle room to negotiate on price.
Still, new home buyers were able to extract bargains. The median price in June was $206,200, compared to $234,300 in June 2008. It was also $13,000 less than the median price the month before.
Much of June's sales activity came in the Midwest, where new home sales had lost a lot of ground. Sales were up 43 percent in the Midwest, compared to a 29 percent gain in the northeast and a 23 percent rise in the west.
The adjustment in inventory, however, was one of the most hopeful signs. The number of unsold homes fell a record 36 percent from June 2008. Government economists estimate it would take 8.8 months to sell the inventory of new homes at the current rate.
Despite the promising report, homebuilders say they are being squeezed by the falling values of existing homes. They also say its difficult to obtain adequate credit.
"The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices and forestalling an economic recovery," said Joe Robson, chairman of the National Association of Home Builders, in testimony before Congress last week.
