December 23, 2009
U.S. New Home Sales Pace Slows 11 Percent In November
While the pace of existing home sales in the U.S. quickened in November, the pace of new home sales fell 11 percent from October.
"The tax credit put a Band-Aid over the housing problem and in October and November we ripped it off" as it was set to expire, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected sales would fall. "Demand for housing is not likely to pick up on a consistent basis until we start to see some improvement in employment."
Think foreclosures when trying to rationalize the divergence in pace between existing and new home sales.
∙ A Sprinter's Or Marathoner's Pace? [SocketSite]
∙ Sales of U.S. New Homes Unexpectedly Fell in November [Bloomberg]
First Published: December 23, 2009 8:00 AM
Comments from "Plugged In" Readers
The key to the real estate market is the move up buyer re-entering the market. New homes are preferred by many in this segment of the market. The overall economy will not improve unless builders can start building and selling their homes.
Posted by: Fred Doleac at December 25, 2009 4:00 PM
The overall economy will not improve unless builders can start building and selling their homes.Uh…I think you have it backwards. The real estate market overall, including new homes, won't start improving until the real economy improves, because people need jobs that are steady and high-paying in order to be able to purchase those new homes. Especially now that the credit bubble is popped and deflating.
Posted by: Brahma (incensed renter) at December 25, 2009 10:01 PM
If Mr. Vitner is correct that "the tax credit put a Band-Aid over the housing problem and in October and November we ripped it off", then the extended tax credit, which is in effect now and is set to expire at the end of April, might have a large effect on home sales in May. The Los Angeles Times is reporting that the credit won't be extended again:
Proponents of the $8,000 credit for first-time buyers and the $6,500 credit for move-up buyers made it clear during the debate on Capitol Hill that the benefits would not be renewed when they expire. And a lobbyist for the National Assn. of Realtors confirmed that at the group's annual convention last month. Lawmakers "made us promise practically in blood that we would not come back" for another extension, Linda Goold, the Realtor group's director of tax policy, told her members.So if the extended credit just pulled a lot of so-called "move up buyers" into the market ahead of when they usually would have "moved up" anyway, we should have a measureable drop-off in May, 2010.
Posted by: Brahma (incensed renter) at December 27, 2009 6:19 PM
What Fred Doleac said is consistent with Calculated Risk:
Residential investment tends to be a leading indicator.
I do agree that until move-up buyers are the normal percentage, it would be hard to say the housing market is "normal."
Posted by: corntrollio at December 29, 2009 8:44 AM