New Home Sales Post Signs of Housing Recovery

Sales of new U.S. homes rose to a two-year high in September, according to the Commerce Department last week, another sign the housing market is moving in the right direction.

In September, new homes sold at an annual pace of 389,000, up 5.7 percent from August and up a dramatic 27.1 percent from one year ago. The U.S. housing market has not seen such a high sales rate since April 2010, when they were temporarily inflated by a home-buyer tax credit. And new home sales have now risen on a yearly basis for the past 15 consecutive months.

By historical standards though, sales are still near the bottom. During the housing boom of 2003 to 2006, annual sales were upwards of one million, and the decade before that they were averaging around 875,000 each year.

“Though the level of new-home sales remains very low, this report adds to the evidence of housing market recovery,” said analysts at RDQ Economics in a MarketWatch article.

Several factors are combining to help new home sale increase. Mortgage interest rates remain outrageously low, making even pricier new homes more attractive to buyers. Plus, the number of distressed properties on the market has fallen to some of the lowest level since the housing bubble burst, pushing more buyers towards new homes. And there was only a 4.5-month supply of new homes for sale in September.

“All the housing data has taken a turn for the better,” said Steven Ricchiuto, chief economist for MSUSA in a CNN Money article. “Clearly mortgage rates at such a low level and what appears to be an increase in banks’ willingness to make loans has boosted activity off the lows.”

The national median price for new homes fell 3.2 percent from August to $242,400, but was up 11.7 percent from September 2011.

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