New home sales blast past expectations

More people are buying: Sales of new homes hit their highest level since last September.

By Les Christie, CNNMoney.com staff writer

Last Updated: August 26, 2009: 1:49 PM ET

NEW YORK (CNNMoney.com) -- Sales of newly constructed homes leaped unexpectedly in July to hit their highest level since last September.

New homes sold at an annualized rate of 433,000 during the month, according to a joint report issued by the Census Bureau and Department of Housing and Urban Development.

That far exceeded analysts' forecasts and was up 9.6% from the revised 395,000 rate recorded in June. A consensus of industry experts surveyed by Briefing.com had predicted July sales of 390,000.

The news followed other positive housing market reports earlier this month, including a spike in existing home sales, home prices and affordability.

"There are many economic conditions that led to the surge," said Bob Walters, chief economist for Quicken Loans. "But certainly low mortgage rates, huge price reductions on the high inventory of new builds, and the first-time homebuyer tax credit have been instrumental in getting consumers to take the plunge into the real estate pool of opportunity."

Plus, the psychology of the market is changing, according to Peter Morici, an economics professor at the University of Maryland. "The notion that prices will drift down forever is gone," he said. "Now people are thinking the window of opportunity will not be open forever."

"Home shoppers visiting builders' model homes are more likely to purchase than earlier in the year," added Brad Hunter, chief economist for Metrostudy, a real estate research and consulting firm.

They are also canceling fewer contracts. Of the 10 markets where Hunter examines cancellation rates, most are running at substantially lower levels. In Phoenix, for example, the cancellation rate lately has been about 4% compared with 7% late last year.

It certainly is an attractive market. The median price of a new home declined again last month to $210,100, down only slightly from June but off more than 11% from July 2008.

The Housing Market Index, a measure of builder confidence calculated by the National Association of Homebuilders and Wells Fargo, inched up again this month to 18, its highest level in more than a year.

That's still low by normal standards: Anything below 50 indicates that more builders think business conditions are poor. And new sales, though rising, are still well below what they were last August, when they sold at a 520,000 annualized rate.

But the sales spike did help reduce the inventory: Available new homes dropped to 271,000 -- the lowest total in 16 years -- from 281,000 a month earlier. That's down to a healthier 7.5 month supply at the current rate of sales from 8.8 months in June.

Still, when factoring in existing homes for sale, inventory levels remain high, according to Mike Larson, real estate analyst for Weiss Research.He also pointed out that the continued influx of foreclosed properties over the next year or so will replenish supplies.

However, supply could creep back up at the end of the year. On Nov. 30, the $8,000 tax credit for first-time homebuyers is also set to expire. And experts worry that the brisk pace of sales will fall off if homebuyers are sidelined once the incentive disappears.

But for now, they are optimistimic."This [report] is clear evidence the dramatic cut back in housing starts, plus increasing consumer confidence and the targeted tax cut for first-time buyers, is restoring stability to the new home market," said Larson.

August 21, 2009

Midwest Home Sales Post 8.5 Percent Gain in July

By THE ASSOCIATED PRESS

Filed at 3:52 p.m. ET

KANSAS CITY, Mo. (AP) -- Home sales in the Midwest surged 8.5 percent in July, the second straight annual increase, as new home buyers snapped up properties to take advantage of a temporary federal tax credit, the National Association of Realtors reported Friday.

The median sales price in the 12-state region declined about 6 percent from year-ago levels to $157,200 -- the smallest decline among the four national regions, the association said.

Nationally, home resales rose 5.6 percent in July, the first annual increase since November 2005. Affordability is driving sales -- the median sale price fell 15 percent to $178,400.

Compared with last year, home sales rose in all but three of the 12 Midwestern cities tracked in The Associated Press-Re/Max Monthly Housing Report, also released Friday. The report analyzed all home sales, regardless of company affiliation, in the metropolitan statistical areas.

While sales were up, median sale prices continued to fall in a majority of the markets, a combination of sellers being more realistic about the economic environment and consumers whittling away at a large inventory of foreclosed homes.

Real estate agents in several markets said they continued to see a boost in sales because of the first-time home buyer credit, which provides consumers with up to $8,000. The credit expires at the end of November, though the real estate industry is pushing Congress to extend it and sustain the housing rally.

Bryan Bechler, an agent with Reece & Nichols in Kansas City, Mo., said first-time buyers make up 20 percent of his sales. The local market appears to be at a turning point with July sales and prices flat.

The biggest sales gain came in Fargo, N.D., which saw sales rise 24 percent in July, according to the AP-Re/Max report. Median sale prices were also on the move, rising almost 8 percent to $143,000.

''I believe that at least in the last few months we've turned the corner,'' said Mark Mason, an agent with Prudential Premiere, who said business in Fargo has boomed in the past three months as consumers bounced back from a bad winter and springtime flooding.

He said that sales have been up in most price ranges, although the very high-end homes above $800,000 are still difficult to move. He also said new regulations forced on appraisers in the wake of the housing bubble has increased the time for deals to get done from a couple weeks to a couple months or longer.

''We're having little glitches like that that are driving us crazy,'' Mason said.

Detroit continued to see higher sales in July, rising 15 percent. But those sales are mostly of foreclosed homes or properties selling for a fraction of their original worth as investors pick at the bones of a city wracked with losses to its automotive and other manufacturing industries. The median sale price plummeted almost 34 percent from year-ago levels to $65,000.

Mario Hall, an agent with Thompson Real Estate, said he's routinely selling homes for less than $10,000 within Detroit proper and recently sold a duplex for $2,000. He said the majority of his buyers are investors and often pay cash.

He added that while he gets calls about the first-time home buyer tax credit, few buyers can get financing for a house worth enough to receive the full $8,000.

Hall said he believes the surge of sales that Detroit has seen could end in the next year or so as the true deals are snapped up. Home prices, however, won't come back until the homes in the worst shape -- typically foreclosed homes that have been gutted or vandalized -- are taken off the market.

''Some you really can't give away,'' he said.

The largest Midwestern sales drops came in the cities of Wichita, Kan.; Indianapolis and Cleveland, which have experienced continued pressure to their local economies and saw sales declines of about 9 percent or more in July.

Wichita has dealt with a number of layoffs within its key aviation industry as the recession dried up the market for private and corporate jets.

Sales in the market fell almost 16 percent in July while the median sale price declined 7 percent to $124,900.

Marilyn Brown, an agent with Prudential Dinning-Beard, said the Wichita market typically lags the rest of the country and it is just now seeing the increase in foreclosures that has hurt other parts of the country.

''If we could get finished with all the layoffs, people can feel confident about keeping a job and buying a home,'' Brown said.

Initial claims drop in latest week

Government report shows 550,000 first time claims for jobless benefits were filed last week, fewer than forecast. By Ben Rooney, CNNMoney.com staff writer Last Updated: August 6, 2009: 11:25 AM ET NEW YORK (CNNMoney.com) -- The number of Americans filing first time claims for unemployment benefits fell last week, while the number of people requesting ongoing benefits rose, the government said Thursday. There were 550,000 initial jobless claims filed in the week ended Aug. 1, down 38,000 from an upwardly-revised 588,000 the previous week, according to the Labor Department's weekly report. The total was smaller than the 580,000 new claims economists surveyed by Briefing.com had forecast. The number of initial jobless claims filed in recent weeks had been distorted by seasonal adjustments related to plant closures in the auto industry, which occurred earlier this year. But a Labor Department official said this seasonal volatility had "run its course." The report suggests that the pace of the decline in the labor market is slowing. But many economists warn that it's too soon to say the nation's job woes are over. "The numbers are volatile even when the trend is clear," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research report. "We need to see several more weeks at this level to confirm a real shift." Still, last week's tally "certainly looks good" compared to previous weeks, Shepherdson said. The four-week moving average of initial claims, which smoothes out volatility in the measure, was 555,250. That's a decrease of 4,750 from the previous week's revised average of 560,000. The average has declined for six weeks in a row. The government also said 6,310,000 people filed continuing claims in the week ended July 25, the most recent data available. That's up 69,000 from the preceding week'srevised 6,241,000 claims. The four-week moving average of continuing claims fell 148,500 to 6,278,750. Thursday's report came a day before the government's closely watched monthly jobs report. The Labor Department report is expected to show that the economy shed 328,000 jobs in July, less than the 467,000 reported for June. The unemployment rate is predicted to rise to 9.6% from 9.5%. First Published: August 6, 2009: 8:48 AM ET

Find this article at: http://money.cnn.com/2009/08/06/news/economy/initial_claims/index.htm