Thursday, June 23, 2011

New home sales up 33 percent in West, but remain at historic lows

New single-family home sales rose slightly in the US, and rose by one-third in the West region, which includes Colorado. However, according to new data released by the Census Bureau today, new home sales in the West remain at the second-lowest May total recorded in at least ten years.

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up year over year, increasing 33 percent to 8,000 in May 2011 from 6,000 new homes sold in May 2010. Nationwide, sales rose 15 percent, increasing from 26,000 to 30,000 during the same period.

In May, new home sales were at the second-lowest May total in more than a decade. Only May 2009 reported fewer new home sales with a total of 6,000. The first graph shows monthly new home sales totals for each month since 2003:

For the West region:

The second graph shows that new home sales continue to fall and have generally followed a downward trend since the middle of the decade.

New home sales peaked during the spring and summer of 2005 and have trended downward since. The number of new houses sold in the United States is down 76 percent since the peak of March 2005, and new home sales in the West have fallen 79 percent since sales peaked in the region during March 2004.

The third graph shows the declines in both US and regional totals in new homes for sale.

The number of new homes for sale has also fallen off considerably. The number of new houses for sale in the West has fallen 75 percent since the total peaked during June 2007, and the same total has fallen 71 percent in the US since the number of new homes for sale peaked in the US during August 2006.

The number of new single-family homes for sale in the West is now at the lowest level it's been in more than ten years. This reflects very low demand in the face of an ongoing and large number of new foreclosures and low-priced properties in many areas of the West, including Colorado. Although foreclosures have fallen in Colorado in recent years, foreclosure rates remain at historic highs.

As a final note, we can also look to the new home inventory. In this case, we calculate inventory by subtracting the number of new home sales in a given month from the number of new homes for sale at the end of the previous month. In the final graph, we see that the inventory is now at a ten-year low of 27,000 homes. This is good news for owners seeking to sell homes since it suggests that fewer new homes are sitting and waiting to be sold, thus diminishing some of the inventory-driven downward pressure on prices.

In the most recent housing starts data for May, discussed here, there were some signs of life in new housing construction as as regional housing starts hit a 33-month high. Nevertheless, starts remained at historic lows, so new home sales and homes for sale are likely to continue at very low levels, at least in the near term.