New Home Sales Slows

Posted by Noah Rosenblatt on February 27, 2006 at 11.20 AM

A: January report shows that New Home Sales dropped by 5% from December levels, with 20% more homes on the market than the year before.

Hmmm, I wonder if the rise in new homes inventory is a result of developers and pre-construction investors unloading their holdings in highly speculative markets across the nation? Read my Stop The Dice: Developers Set To Square Off post I wrote last month on the 'scaling back' news that was coming out back then.

According to David Seiders, chief economist for the National Association of Home Builders:

"There's been a definite upswing in the inventory level for some time," said Seiders. "The months supply was held steady by a pretty strong sales pace. The big reason for the big uptick in months supply is the slowing sales pace."

In addition to more inventory and slowing sales, the report also showed an increase in 'time on the market' for new homes:

But even the reports' figure on median time it took for completed homes to be sold rose to 4.5 months from a median of 4 months throughout 2005, a number that wasn't affected by the warm January weather.

Just another sign of a softening housing market. Nothing to worry about here as this report shouldn't be too much of a surprise. However, one item that should be noted is a report from the Home Builders on cancelled orders:

Home builders have reported an increased number of orders for new homes being cancelled in recent months, raising concerns that buyers who were looking to real estate for an investment rather than their own housing needs are pulling out of the market. Such cancellations could put downward pressure on prices in some formerly hot markets.
It is becoming clear that investors and speculators that have helped power the housing boom in past years are looking elsewhere for investments. This dwindling supply of buying pressure could pick up its pace down the road resulting in a further slowing of housing price appreciation in highly speculative markets such as Miami, Las Vegas, Los Angeles, & Phoenix.

~ Home Sales: Is the market glutted?

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