Tuesday, August 23, 2011

In the West, new home sales at lowest level reported in more than ten years

New single-family home sales in July rose slightly in the US while rising by half in the West region, which includes Colorado. However, according to new data released by the Census Bureau today, the first seven months of 2011 have shown the smallest number of new home sales in at least a decade in the West. July 2011's total was the second-lowest July total recorded in at least ten years.

Nationally, a similar trend was reported. According to the AP:

WASHINGTON (AP) -- Sales of new homes fell for the third straight month in July, a sign that housing remains a drag on the economy. If the current pace continues, 2011 would be the worst year for new-home sales on records dating back at least half a century.

Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That's less than half the 700,000 that economists say represent a healthy market.

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up year over year, increasing 50 percent to 6,000 in July 2011 from 4,000 new homes sold in July 2010. Nationwide, sales rose 3.8 percent, increasing from 26,000 to 27,000 during the same period.

For the first seven months of 2011, there were 44,000 new homes sold in the West compared to 46,000 during the same period last year. 2011's total is the smallest year-to-date total recorded in the West in more than a decade.

In July, new home sales were at the second-lowest July total in more than a decade. Only July 2010 reported fewer new home sales with a total of 4,000. 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 well below the peak periods for sales that occurred earlier in the decade.

New home sales peaked during the spring and summer of 2005 and trended downward until leveling off in 2010. The number of new houses sold in the United States is down 78 percent since the peak of March 2005, and new home sales in the West have fallen 84 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 74 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 near 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, at 28,000 is near the 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.

See here for the most recent housing starts data. Housing starts show continued demand for multi-family units, increasing by 50 percent, while single-family starts increased 13 percent, year over year.