Inventory for new homes has fallen closer to a balanced market. (Photo: iStockphoto)
Builders of new homes continued to shed inventory, which was down to a 6.7 months supply following a 6.2 percent increase in sales for October, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
The sales figure calculates to 430,000 new homes being sold this year, the highest level since September 2008. It’s also the lowest inventory level since December 2006.
The median price for a new home last month was $212,200, down just .5 percent from October 2008. Although inventory has fallen closer to a balanced market — generally considered a six-month supply — it will be awhile before builders begin new construction.
The number of unsold homes has dropped to a 40-year low, but most builders say at today’s prices, it will cost them more than they can get for a new home. So until demand rises for new homes is sufficient to raise prices enough for builders to make a profit, don’t expect to hear the sound of nail guns in the morning air anytime soon.
Home builders are just as enthusiastic about the extended and expanded home buyers tax credit, attributing the program to helping sell homes and reduce inventory.
“We are getting some help from the Federal Reserve in terms of low rates, lower prices and of course the tax credit,” Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, told Bloomberg. “People are coming off the fence and getting into the market. We have seen a bottom. I’m pretty confident that the turn in the housing industry is behind us.”
Attention is being especially focused on new homes because of its immediate impact on the economy. Although resale homes are also, new homes have a greater economic influence.
New home construction creates immediate jobs, increases demand for building materials and products such as light and plumbing fixtures. Most economists agree that new construction is key to not only an economic turnaround, but helping sustain the economy as well.
Although housing is one key to a sustainable economy, the unemployment rate is the biggest hurdle to current fortunes. The national unemployment rate is 10.2 percent, the highest in 26 years. Economists in a Bloomberg survey believe unemployment will stay above 10 percent through the first half of 2010. —Rick Hazeltine